The Reserve Bank of India (RBI) has set underwriting terms for primary dealers ahead of a ₹33,000 crore government bond reissue, with minimum commitments applying to two securities scheduled for auction Friday, Oct. 23.
The RBI’s Oct. 22 notice lists ₹19,000 crore of 6.53% GS 2031 and ₹14,000 crore of 7.71% GS 2066. Together, those amounts make up the full announced reissue.
Each primary dealer must accept a Minimum Underwriting Commitment (MUC) of ₹453 crore for GS 2031 and ₹334 crore for GS 2066. Those same sums are also each dealer’s minimum bid in the Additional Competitive Underwriting (ACU) auction. These are dealer-level floors, not the entire amount available for either security.
An ACU bid may not exceed 30% of the issue’s notified amount, and each dealer must bid at least its MUC. Under RBI rules, MUC commitments are divided equally among dealers for at least half of each issue; the ACU auction assigns underwriting for the balance. RBI will use a multiple-price method for the underwriting auction.
The underwriting process allocates dealer commitments, while the Ministry of Finance’s notice governs the separate sale of bonds to bidders. The two auctions serve different functions, although both are scheduled for the same date.
RBI guidelines allow securities to be allotted to dealers if investor subscriptions leave a shortfall in the government sale. Dealers receive commission on underwriting accepted by the RBI even when no bonds are allotted to them. Their commitments provide a backstop for the sale, with commission applying to accepted underwriting.
The Ministry of Finance’s Oct. 19 Gazette notification separately schedules the government securities sale for Oct. 23 and permits the government to retain additional subscriptions of up to ₹2,000 crore for each security. Successful bidders are due to pay on Oct. 26, which the notification names as the payment and reissue date.
