Skip to main content

Competitive and Non-Competitive Bidding for G-Sec

An investor can subscribe to government securities by placing competitive or non-competitive bids in the auctions.

What is Government Security (G-Sec)?

Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. 

G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

What are the types of bidding for G-Secs?

G-Secs are issued through auctions. An investor, depending upon his eligibility, may bid in an auction under either of the following categories –

  • Competitive Bidding
  • Non-Competitive Bidding

What is Competitive Bidding?

  • In a competitive bidding, an investor bids at a specific price / yield and is allotted securities if the price / yield quoted is within the cut-off price / yield. 
  • Competitive bids are made by well-informed institutional investors such as banks, financial institutions, PDs, mutual funds, and insurance companies. 
  • The minimum bid amount is ₹10,000 and in multiples thereof. 
  • Multiple bidding is also allowed, i.e., an investor may put in multiple bids at various prices / yield levels.

What is Non-Competitive Bidding (NCB) facility?

With a view to encouraging wider participation and retail holding of Government securities, retail investors are allowed participation on ‘non-competitive’ basis in select auctions of dated Government of India (GoI) securities and Treasury Bills.

Who are allowed to bid under NCB?

  • Participation on a non-competitive basis is open to a retail investor who –
    • Does not maintain current account (CA) or Subsidiary General Ledger (SGL) account with Reserve Bank of India (RBI)
    • Submits the bid indirectly through an Aggregator / Facilitator permitted under NCB.
  • Retail investor, for the purpose of NCB, is any person, including individuals, firms, companies, corporate bodies, institutions, provident funds, trusts, etc. 
  • Regional Rural Banks (RRBs) and Cooperative Banks are covered under NCB only in the auctions of dated securities in view of their statutory obligations and are eligible to submit their non-competitive bids directly. 
  • State Governments, eligible provident funds in India, the Nepal Rashtra Bank, Royal Monetary Authority of Bhutan, with the approval of Government, are covered under NCB only in the auctions of T-Bills without any restriction on the maximum amount of bid and their bids are outside the notified amount. 

What are criteria for placing bids under NCB?

  • Under NCB, an investor can make only a single bid in an auction.
  • In case of GoI securities, allocation of non-competitive bids from retail investors is restricted to a maximum of 5% of the aggregate nominal amount of the issue within the notified amount. 
  • The minimum amount for bidding is ₹10,000 (face value) and thereafter in multiples of ₹10,000. 
  • In the auctions of GoI dated securities, the retail investors can make a single bid for up to ₹2 crore (face value) per security per auction.
  • The aggregate amount reserved for NCB in the case of SDLs is 10% of the notified amount subject to a maximum limit of 1% of notified amount for a single bid per stock.
  • In addition to scheduled banks and primary dealers, specified stock exchanges are also permitted to act as aggregators / facilitators. These stock exchanges submit a single consolidated non-competitive bid in the auction process.

How are securities allotted under NCB?

  • Allotment under the non-competitive segment is at the weighted average rate of yield / price that emerge in the auction on the basis of the competitive bidding. The Aggregator / Facilitator can recover up to 6 paise per ₹100 as brokerage / commission / service charges for rendering this service to their clients. 
  • In case the aggregate amount of bid is more than the reserved amount (5% of notified amount), pro rata allotment is made. 
  • In case the aggregate amount of bids is less than the reserved amount, the shortfall ise taken to competitive portion.


References

Reserve Bank of India. (2020, April 01). 'Government Securities Market in India – A Primer'. Retrieved from https://www.rbi.org.in/Scripts/FAQView.aspx?Id=79


Follow at - Telegram   Instagram   LinkedIn   Twitter   Facebook

Labels:

Comments

Post a Comment

Popular Posts

Digital Payments – E-mandate Framework 2026

Reserve Bank of India (RBI) has issued e-mandate framework for digital payments. What is an e-mandate?  A mandate is a standard instruction that a customer provides to his / her issuing bank and other institutions allowing them to automatically debit the mentioned amount from his / her bank account. e-mandate is the electronic version of it. To whom shall the framework be applicable? The framework shall be applicable to Payment System Providers and Payment System Participants. To which transactions shall the framework be applicable? The framework shall be applicable to processing of recurring transactions, domestic or cross-border, using cards / Prepaid Payment Instrument (PPI) / Unified Payments Interface (UPI). What are the guidelines for registration and revocation of e-mandate? A customer desirous of opting for e-mandate facility shall undertake a one-time registration process. The mandate shall be registered only after successful validation of additional factor of authenticati...
Post a Comment
Read more

Credit Information Reporting

Reserve Bank of India (RBI) had issued directions on credit information reporting by the regulated entities. What are Credit Information Companies (CICs)? Credit Information Companies (CICs) mean companies that have been granted a certificate of registration by RBI under section 5 of the Credit Information Companies (Regulations) Act, 2005 (CICRA).  The following CICs are registered with RBI – CRIF High Mark Credit Information Services Private Limited Equifax Credit Information Services Private Limited Experian Credit Information Company of India Private Limited TransUnion CIBIL Limited What are Credit Institutions (CIs)? Credit Institutions (CIs) mean the following institutions – Commercial Banks  Small Finance Banks (SFBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) Central Co-operative Banks (CCBs) All India Financial Institutions (AIFIs) regulated by RBI – Export I...
Post a Comment
Read more

Utkarsh 2029

Reserve Bank of India (RBI) has published its medium-term strategy framework – Utkarsh 2029, for the period April 2026 to March 2029. Utkarsh RBI had first formulated its medium-term strategy framework, viz. ‘Utkarsh 2022’ for the period 2019-2022 in July 2019, replacing its annual action plans as the latter spanned over a short period, insufficient to pursue strategic objectives.  The strategic framework contained, inter alia, RBI’s Mission, Core Purpose, Values and Vision Statements, reiterating RBI’s commitment to the Nation. It became a medium-term strategy document guiding RBI’s progress towards realisation of the identified milestones. The subsequent strategy framework, i.e., ‘Utkarsh 2.0’, spanned the period 2023-25. Utkarsh 2029  Utkarsh 2029 is the medium-term strategy framework for the period April 2026 to March 2029. Utkarsh 2029 has a 3-layered structure consisting of strategy pillars guided by the vision and values of RBI. Vision of Utkarsh 2029 – Continue excelle...
Post a Comment
Read more

Treatment of Wilful Defaulters and Large Defaulters

Reserve Bank of India (RBI) had issued the directions on treatment of wilful defaulters and large defaulters. To whom shall the directions be applicable? The directions shall be applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) Central Co-operative Banks (CCBs) All India Financial Institutions (AIFIs) regulated by RBI – Export Import Bank of India (EXIM Bank) National Bank for Agriculture and Rural Development (NABARD) National Housing Bank (NHB) Small Industries Development Bank of India (SIDBI) National Bank for Financing Infrastructure and Development (NaBFID) Non-Banking Financial Companies (NBFCs) categorized as Middle Layer and above layers – Deposit taking NBFC (NBFC-D) NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro Finance Institutions (NBFC-MF...
Post a Comment
Read more

Guidelines to facilitate faster cross-border inward payments

Reserve Bank of India (RBI) has issued guidelines to facilitate faster cross-border inward payments. What is the rationale behind the guidelines? The RBI’s Payments Vision 2025 aims to bring efficiency in the cross-border payments aligning with the G20 roadmap for cross-border payments that has set targets for achieving cheaper, faster, more transparent, and more accessible cross-border payments. One of the challenges with speed of cross-border payments is experienced at the beneficiary leg i.e., the time taken from receipt of the payment at the beneficiary bank till credit to the beneficiary account. What are the guidelines to facilitate faster cross-border inward payments? Banks shall inform their customer of the receipt of cross-border inward transactions immediately on receipt of inward message. Messages received after close of operating hours of banks shall be informed to customer immediately at the start of the next business day. Banks shall undertake reconciliation and confirmat...
1 comment
Read more