ISAS Insights

On 23 December 2013 the Reserve Bank of India (RBI) introduced the Inflation National Savings Securities-Cumulative (IINSS-C), or CPI-indexed bonds. The deadline to buy these bonds was 31 December 2013 and they could be availed of at any State Bank of India (SBI) branch, associate banks, nationalised banks, the three private banks (HDFC, ICICI, and AXIS) and Stock Holding Corporation of India Ltd. (SHCIL). The range for investment is between Rs 5,000 and Rs 500,000. The interest rate on these bonds is linked to the combined-CPI (Base 2010 = 100) and comprises two parts: the fixed rate (1.5%) and the CPI inflation rate, based on 3-month lag CPI, which will be compounded with the principal on a half-yearly basis. The principal amount will be adjusted with the CPI inflation rate and then interest is calculated on this adjusted principal using the coupon rate of 1.5%. The tenure is fixed at 10 years and the full amount will be paid only at the time of maturity.