Ref.No. IDMD / 6013 /08.02.33/2008-09

June 1, 2009

All Scheduled Commercial Banks excluding RRBs/
All State Co-operative Banks/All Scheduled Primary
(Urban) Co-operative Banks /All Financial Institutions/
All Primary Dealers

Dear Sirs,

Auction of Government of India Dated Securities

Government of India have offered to sell (re-issue) of (a)  a “ new six year Government  Stock” for a notified amount of Rs.8,000 crore (nominal) through a yield based auction using uniform price method vide Notification No.4(1)-W&M/2009 dated June 1, 2009, (b)  “8.20 percent Government Stock 2022” for a notified amount of Rs.5,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009 (i) dated June 1, 2009 and (c) "7.50 percent Government Stock 2034" for a notified amount of Rs.2,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009(ii) dated June 1, 2009. The Reserve Bank of India at Mumbai will conduct the auctions on June 5, 2009. The salient features of the auctions and the terms and conditions governing the issue of the Stocks are given in the Notifications (copies enclosed), which should be read along with the General Notification F.No.  4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

2. We wish to draw your attention, in particular, to the following:

(i) The Stocks will be issued for a minimum amount of Rs.10,000/- (nominal) and in multiples of Rs.10,000/- thereafter.

(ii) In all the auctions, Government Stock up to 5% of the notified amount of sale will be allotted to the eligible individuals and institutions under the Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (enclosed with the notifications F. No.4 (1)-W&M/2009, F. No.4 (1)-W&M/2009(i), and F. No.4 (1)-W&M/2009(ii)  all dated June 1, 2009). Each bank or PD on the basis of firm orders will submit a single consolidated non-competitive bid on behalf of all its constituents and non-constituents  in electronic format on the Negotiated Dealing System (NDS).  Allotment under the non-competitive segment to the bank or PD will be at the weighted average rate of yield/price that will emerge in the auction on the basis of the competitive bidding.

(iii) Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on June 5, 2009. Bids in physical form will not be accepted except in extraordinary circumstances specified by the Reserve Bank of India. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.

(iv) An investor can submit more than one competitive bids at different yields/prices (as the case may be) in electronic format on the Negotiated Dealing System (NDS). However, the aggregate amount of bids submitted by an investor in an auction should not exceed the notified amount of auction.

(v) On the basis of bids received, the Reserve Bank will determine the cut-off yield/price (as the case may be) up to which tenders for purchase of Government Stock will be accepted at the auctions. Bids quoted at rates higher/lower (as the case may be) than the cut-off yield/price determined by the Reserve Bank of India will be rejected. Reserve Bank of India will have the full discretion to accept or reject any or all bids either wholly or partially without assigning any reason

(vi) The result of the auctions will be announced on June 5, 2009 and payment by successful bidders will be on June 8, 2009 (Monday).

(vii) The Government Stocks will be issued by credit to Subsidiary General Ledger Account (SGL) of parties maintaining such account with Reserve Bank of India or in the form of Stock Certificate.  Interest on the Government Stock will be paid half-yearly.

(viii) The Government Stocks will be repaid at par on June 8, 2015,  February 15, 2022 and August 10, 2034, respectively.

(ix) The Stocks will qualify for the ready forward facility.

(x) The Stock will be eligible for “When Issued” trading during the period June 2-5, 2009 in accordance with the guidelines on ‘When Issued’ transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI /2006-07/178 dated November 16, 2006 as amended from time to time.

Yours faithfully,

(R. N.Kar)
General Manager

Encls:  As above