Punjab announces new rules for issuing govt securities through RBI
Chandigarh: The Punjab Government has introduced new rules for issuing government securities to raise money. The Finance Department issued the notification on September 1. The new rules replace the earlier notification issued on July 26, 2019.
Under the new rules, the Punjab Government can issue government securities from time to time to raise funds. These securities can carry a fixed interest rate, which will remain unchanged during their period.
The securities will have a minimum maturity period of one year. They may be issued at face value, at a discount or at a premium, depending on the terms decided by the government.
Who can invest?
Several types of investors can buy Punjab government securities. These include individuals, companies, firms, institutions, pension funds, provident funds, trusts and other government bodies.
People living outside India can also invest if they are allowed to do so under the applicable foreign exchange rules.
The minimum investment has been fixed at Rs 10,000. Further investment can be made in multiples of Rs 10,000, unless the RBI and Punjab Government decide on another amount.
RBI will conduct the auction
The Reserve Bank of India (RBI) will manage the process for issuing these securities. It will announce details such as the date, maturity period and method of issue.
Punjab can issue securities through an auction based on either the interest rate (yield) or the price. In a yield-based auction, the interest rate can be decided through bidding. In a price-based auction, the interest rate will already be fixed.
Both competitive and non-competitive bids can be submitted electronically through the RBI's system. Retail investors can also take part through the non-competitive bidding facility.
The RBI, in consultation with the Punjab Government, can accept or reject bids, fully or partly, depending on the auction process.
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Securities can also be sold 'on tap'
The Punjab Government can also sell securities through an on-tap sale instead of a regular auction.
Under this system, investors can submit applications to the RBI or another office notified for the purpose. The sale can continue for a specified period and can be closed whenever decided by the RBI in consultation with the state government.
Existing securities can be converted
The new rules also allow existing government securities to be switched or converted into new securities.
The RBI, in consultation with the Punjab Government, can offer investors the option to exchange certain existing securities for new ones at a fixed price or a price decided through an auction.
Interest and repayment
Interest on the securities will be paid through the RBI's Public Debt Offices. The original amount invested will be returned when the securities reach their redemption date.
The government can also buy back securities before their scheduled maturity through a buyback auction.
The new rules also allow government securities to be transferred, renewed, divided, combined or converted according to the Government Securities Act, 2006 and related rules.
The new framework gives Punjab a clear process for raising money through government securities, with the RBI handling the main auction and issuance process.
- PTC NEWS
