The Government of India on June 12, 2023 announced the sale of dated securities worth Rs. 33,000 crore. The securities to be issued or re-issued include 7.06% GS 2028, 7.26% GS 2033, and New GS 2053, each with the repayment date corresponding to its name.
The government has scheduled the auction on June 16, 2023. This auction will be conducted using the uniform price method for 7.06% GS 2028, 7.26% GS 2033, and the multiple price method for New GS 2053, the release said.
The auction process welcomes both competitive and non-competitive bids, which must be submitted electronically through the Reserve Bank of India’s (RBI’s) Core Banking Solution (E-Kuber) system.
“The non-competitive bids should be submitted between 10.30 a.m. and 11.00 a.m., and the competitive bids should be submitted between 10.30 a.m. and 11.30 a.m,” the release said.
The settlement date for these securities has been set for June 19, 2023. The settlement date signifies the day when the trade is finalised after delivery of securities to the buyer, thus requiring the buyer to complete the payment process by that date.
The coupon rates for the 7.06% GS 2028 and 7.26% GS 2033 are 7.06 per cent and 7.26 per cent, respectively. However, the interest on New GS 2053 has been described as “yield-based,” as mentioned in the release.
Interest will accrue on the nominal value of the securities from the date of issue and will be paid on a half-yearly basis. The securities will only be repaid upon reaching their respective maturity dates.
The securities will be issued for a minimum amount of Rs. 10,000 (nominal) in the bid, with subsequent bids allowed in multiples of Rs. 10,000. After the auction concludes, the results will be announced on the same day.
Long-Term Government Securities
Investing in government bonds, especially long-term ones, offers stability and security to investors. These bonds, with maturities typically lasting seven years or more, can be freely traded in the secondary market, thus allowing for liquidity, too.
Bond prices in the secondary market can fluctuate, potentially leading to a loss of funds if sold at a lower price. Investors should also be aware that premature withdrawal is permitted based on their age, with investors above 60 years being allowed to withdraw funds after four or five years, depending on the bond. Additionally, investors need to account for taxes on the interest earned, as it is considered part of their taxable income.
Banks, post offices, brokerage firms, gilt mutual funds, and the RBI Retail Direct scheme are options for acquiring government bonds. Choosing to invest through a gilt mutual fund can provide the convenience of having a fund manager select the best government bonds on your behalf, but it comes with management charges.
