New FAQ Page 2

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1. What is the inflation index to which inflation rate will be linked? +

Inflation rate will be based on the final combined Consumer Price Index [(CPI) base: 2010=100].
The final combined CPI will be used as reference CPI with a lag of three months. For example, the final combined CPI for September 2013 will be used as reference CPI for whole of December 2013.

2. Who is eligible to invest in the Inflation Indexed National Saving Securities-Cumulative (IINSS-C)? +

Only retail investors would be eligible to invest in these securities. The retail investors would include individuals, Hindu Undivided Family (HUF), charitable institutions registered under section 25 of the Indian Companies Act and Universities incorporated by Central, State or Provincial Act or declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956).

3. What is the interest rate on these securities? +

There will be two parts in the interest rate. One, fixed rate of 1.5% per annum and second, inflation rate.
For example, if inflation rate during the six months is 5%, then interest rate for this six months would be 5.75% (i.e. fixed rate -0.75% and inflation rate -5%).

4. Is there any floor as inflation may turn into deflation at times? +

Yes, fixed rate of 1.5% would act as a floor, which means that 1.5% per annum interest rate is guaranteed if there is deflation.
For example, if inflation rate is (-) 5%, then interest rate should be (-) 3.5% by simple calculation. But in such case, negative inflation will not be recognised and investors would get fixed rate of 1.5% (please see example 2 at 23).

5. When do I get interest? +

Interest will be accrued and compounded in the principal on half-yearly basis and paid along with principal at the time of redemption.

6. What will I get on redemption? +

7. An example of cash flows/ compounding of principal for illustration purpose is as under: +

Fixed rate 1.5% per annum
Issue/ Coupon/ maturity date	Fixed rate	CPI	Inflation rate *	Interest rate (Compounding rate)	Principal
Issue/ Coupon/ maturity date	Fixed rate	CPI	Inflation rate *	Interest rate (Compounding rate)	Principal
I	II	III	IV	V=II+IV	VI=VI*V
25-Dec-13		150			5000
25-Jun-14	0.75	160	6.67	7.4	5371
25-Dec-14	0.75	166	3.75	4.5	5613
25-Jun-15	0.75	175	5.42	6.2	5959
25-Dec-15	0.75	185	5.71	6.5	6344
25-Jun-16	0.75	190	2.70	3.5	6563
25-Dec-16	0.75	200	5.26	6.0	6958
25-Jun-17	0.75	210	5.00	5.8	7358
25-Dec-17	0.75	218	3.81	4.6	7693
25-Jun-18	0.75	228	4.59	5.3	8104
25-Dec-18	0.75	235	3.07	3.8	8414
25-Jun-19	0.75	246	4.68	5.4	8870
25-Dec-19	0.75	255	3.66	4.4	9262
25-Jun-20	0.75	265	3.92	4.7	9694
25-Dec-20	0.75	280	5.66	6.4	10316
25-Jun-21	0.75	290	3.57	4.3	10761
25-Dec-21	0.75	305	5.17	5.9	11399
25-Jun-22	0.75	316	3.61	4.4	11895
25-Dec-22	0.75	330	4.43	5.2	12512
25-Jun-23	0.75	340	3.03	3.8	12985
25-Dec-23	0.75	355	4.41	5.2	13655
*Inflation rates are calculated on half yearly basis.

8. What will be the process of investing? +

Investors can invest through the authorised banks and Stock Holding Corporation of India (SHCIL).
They will fill an application form and submit the same along with other documents and payment to the bank.
On receipt of money, the bank will register the investor on the RBI’s web-based platform (E-Kuber) and on validation, generate the Certificate of Holding.

9. What will be the form of these securities? +

These securities will be issued in the form of Bonds Ledger Account (BLA).
The securities in the form of BLA will be issued and held with RBI and thus, RBI will act as central depository.
A certificate of holding will be issued to the holder of securities in BLA.

10. Whether investor needs to open a BLA account with a bank for making an investing? +

Investor does not need to open a BLA with any bank for making investment.
After receiving the money and registration of the investor on RBI’s CBS (E-Kuber), the RBI will open a BLA for each investor and issue a “Certificate of Holding” indicating number of units of IINSS-C held by the investor.