In an apparent bid to soothe the inflation-ravaged common man, the Reserve Bank of India (RBI) is planning to launch CPI-indexed bonds aimed at protecting the savings of retail investors from the impact of price rise by the end of next month, i.e., December.
The apex bank had earlier come up with debt instrument, which were linked to the wholesale price index (WPI). However, with retail inflation returning to double digit after a span of seven months, this may be the right time to roll out CPI indexed bonds. On the macro-front, in a recipe of another rate hike, the provisional annual inflation rate based on all India general Consumer Price Index (CPI) (Combined) for October 2013 on point to point basis (October 2013 over October 2012) accelerated to 10.09%, higher than expectation of over 10% and also higher as compared to 9.84% for the previous month of September 2013. The corresponding provisional inflation rates for rural and urban areas for October 2013 stood at 10.11% and 10.20% respectively, compared to 9.71% and 9.93% respectively in September.
Further, this move does not come as surprise because RBI in its previous policy statement underscored that it would soon launch inflation indexed securities for retail investors of 10 year tenure which would be linked to the new CPI (combined). There it mentioned that the interest rate would be compounded half yearly and will be paid cumulatively on redemption.
Additionally, the government had also announced plans to issue Rs 12,000-15,000 crore of inflation-indexed bonds with 10-year maturity in tranches during the current financial year. The bonds, which are part of the government’s borrowing programme are also aimed to dissuade investors from buying gold. Further while, the first series of bonds was open to all categories of investors, the second series will be exclusively for retail investors.
The apex bank had earlier come up with debt instrument, which were linked to the wholesale price index (WPI). However, with retail inflation returning to double digit after a span of seven months, this may be the right time to roll out CPI indexed bonds. On the macro-front, in a recipe of another rate hike, the provisional annual inflation rate based on all India general Consumer Price Index (CPI) (Combined) for October 2013 on point to point basis (October 2013 over October 2012) accelerated to 10.09%, higher than expectation of over 10% and also higher as compared to 9.84% for the previous month of September 2013. The corresponding provisional inflation rates for rural and urban areas for October 2013 stood at 10.11% and 10.20% respectively, compared to 9.71% and 9.93% respectively in September.
Further, this move does not come as surprise because RBI in its previous policy statement underscored that it would soon launch inflation indexed securities for retail investors of 10 year tenure which would be linked to the new CPI (combined). There it mentioned that the interest rate would be compounded half yearly and will be paid cumulatively on redemption.
Additionally, the government had also announced plans to issue Rs 12,000-15,000 crore of inflation-indexed bonds with 10-year maturity in tranches during the current financial year. The bonds, which are part of the government’s borrowing programme are also aimed to dissuade investors from buying gold. Further while, the first series of bonds was open to all categories of investors, the second series will be exclusively for retail investors.
No comments:
Post a Comment