The first tranche of inflation indexed savings bonds, which offer protection to retail investors from price rise, will be launched on Monday.

It is open for subscription between December 23 and 31, the Finance Ministry said in a statement. It could, however, be closed before December 31, it added.

Minimum investment

The minimum limit for investment is Rs.5,000 and the maximum is Rs.5 lakh per applicant per annum.

Individuals, Hindu Undivided Family, charitable institutions and universities are eligible for subscription.

The interest rate would be linked to the Consumer Price Index (CPI).

The rate would comprise two parts — fixed rate (1.5 per cent per annum) and inflation rate based on CPI.

The same will be compounded in the principal on half-yearly basis and paid at the time of maturity.

Redemptions

“Early redemptions will be allowed after one year from the date of issue for senior citizens (65 years and above of age) and three years for all others, subject to penalty charges at the rate of 50 per cent of the last coupon payable for early redemption,” the Ministry said.

Early redemptions, however, can be made only on coupon dates.

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 the RBI and, thus, the apex bank will act as central depository.

As distribution or sale of bonds would be through banks, the Ministry said investors might approach branches of State Bank of India and its associate banks and all nationalised banks.

Besides, eligible investors can approach three private sector banks — HDFC Bank, ICICI Bank and Axis Bank — and Stock Holding Corporation of India.

The RBI, in consultation with the government, on November 29, had announced issuance of Inflation Indexed National Saving Securities-Cumulative (IINSS-C).

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