Buyback of inflation indexed bonds announced (Lead, correcting date in last para)

The government on Monday announced the buyback of its inflation indexed bonds (IIBs) linked to the wholesale price index (WPI).

The government will repurchase "1.44 percent Inflation Indexed Government Stock-2023" through reverse auction for an aggregate amount of Rs.6,500 crore (face value)," a finance ministry statement said here.

"The repurchase of the government stocks is purely ad hoc in nature."

"Auction for securities will be on price-based auction format. The auctions will be conducted using multiple price method," the statement said.

The Reserve Bank of India (RBI) has adopted the consumer price index (CPI) as the key measure of inflation in April 2014, while WPI-based securities have not been reissued since then.

Though WPI-based inflation has been in the negative for the last 13 months, the rate has been rising for three months in succession and was minus 1.99 percent in November.

As per market data, IIBs worth Rs.6,500 crore have been issued since 2013, while major holders of the WPI-linked inflation bonds include mutual funds like ICICI Prudential, HDFC, SBI, Kotak Mahindra, Reliance and Deutsche.

Bids for the auction should be submitted in electronic format on the RBI's Core Banking Solution (E-Kuber) system on January 14 between 10.30 a.m. and 12.00 noon. The result of the auctions will be announced on the same day, the statement said.