In a bid to curb India’s appetite for gold, the government introduced Inflation Index Bonds (IIBs) on Wednesday. The first tranche will be introduced on June 4 and will be for
Rs 1,000-Rs 2,000 crore. The IIBs will initially have a tenure of 10 years and total issuance for 2013-14 would be Rs 12,000-Rs 15,000 crore. “Pursuant to the announcement in the Union Budget 2013-14, the Government of India in consultation with the Reserve Bank of India (RBI) has decided to launch Inflation Index Bonds (IIBs), as instruments that will protect savings of poor and middle classes from inflation and incentivise household sector to save in financial instruments rather than buy gold,” the Finance Ministry said in a statement on Wednesday.
The bonds will be based on a fixed real coupon rate and a nominal principal value that will be adjusted against Wholesale Price Index (WPI)-based inflation. The initial series will be issued to institutional investors, including 20 per cent to retail investors.