Inflation indexed bonds to be modified: RBI DG

Worried by the tepid response to inflation-indexed bonds, the Reserve Bank today said they will be modified and made more attractive to investors.
"We have got some feedback. We are in discussion with the government, so some clarification will come...On existing features some clarifications have been sought," RBI Deputy Governor H R Khan said on the sidelines of an event organised by National Housing Bank here.
Individual investment limits may be revised, he said.
"We will come with something. We had a meeting with bank chairmen this morning in Mumbai. All of them have committed. Issues of marketing, availability of forms, awareness campaign -- all these things are happening and bank chairmen have committed to take it forward," he said.

Demand for such bonds, which offer protection to retail investors from price rise, is now picking up, he said, adding that there is no immediate change in its features.
Last month, the RBI extended the date for issuing inflation-indexed bonds to March 31, 2014, from the earlier date of December 31 due to poor response.

The minimum 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 on inflation-indexed bonds, which have a maturity of 10 years, is linked to the Consumer Price Index (CPI). The bond offers a fixed rate of 1.5 per cent per annum and a variable rate based on retail inflation. Interest will be compounded half-yearly and paid at maturity.

The securities will be issued in the form of Bonds Ledger Account (BLA). Securities in the form of BLA will be issued and held with the RBI, which will act as the central depository.
The distribution and sale of the bonds is through branches of the State Bank of India and its associate banks and all nationalised lenders.
Investors can also approach three private sector banks -- HDFC Bank, ICICI Bank and Axis Bank -- and the Stock Holding Corporation of India.
The RBI, in consultation with the Government, had announced the issue of the bonds on November 29.