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

Credit Cards and Debit Cards

Reserve Bank of India (RBI) has issued directions on issuance of credit cards and debit cards. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Non-Banking Financial Companies (NBFCs) for all layers – NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro Finance Institutions (NBFC-MFI)  Housing Finance Company (HFC)  What is a credit card? Credit Card is a physical / virtual payment instrument issued with a pre-approved revolving credit limit that can be used to purchase goods and services or draw cash advances. What is a debit card? Debit Card is a physical / virtual payment instrument linked to a Savings Bank / Current Account which can be used to withdraw cash, make online payments, do Point of Sale (PoS) terminal / Quick Response (QR) code transactions, fund transfer, e...
Post a Comment
Read more

Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)

Reserve Bank of India (RBI) has issued the directions on maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) by banks. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Payments Banks (PBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) District Central Co-operative Banks (DCCBs) What is CRR? Every bank shall maintain in India by way of cash reserve, a sum equivalent to such percent of its Net Demand and Time Liabilities (NDTL) in India, as the RBI in terms of Section 42(1) of the RBI Act, 1934 (for scheduled banks) and Section 18(1) of the Banking Regulation Act (BR Act), 1949 (for non-scheduled banks) [including provisions of Section 18(1) of the BR Act as applicable to co-operative banks], may specify. What is incremental CRR? In terms of Secti...
Post a Comment
Read more

Special Rupee Vostro Accounts (SRVAs)

Reserve Bank of India (RBI) has consolidated the guidelines governing Special Rupee Vostro Accounts (SRVAs). Who can open and maintain Special Rupee Vostro Accounts (SRVAs)? Authorised Dealer (AD) banks in India may open Special Rupee Vostro Accounts (SRVAs) of its branch outside India or a bank resident outside India. Which transactions can be settled through SRVA? The settlement of cross-border trade transactions through SRVA is an additional arrangement for invoicing, payment and settlement of exports and imports in Indian Rupee (INR).  All permissible capital and current account transactions under Foreign Exchange Management Act (FEMA) may be settled through the SRVA.  AD banks maintaining SRVA are permitted to open additional current account for exporter / importer, exclusively for settlement of export / import transactions. What can be the source and use of funds in SRVA? SRVA may be funded by way of inward remittances or transfer from other repatriable INR accounts in t...
Post a Comment
Read more

Payment of Agency Commission to Agency Banks (ABs) and Disbursement of Government Pension by ABs

Reserve Bank of India (RBI) has issued guidelines on the conduct of Government business by Agency Banks (ABs), payment of agency commission to ABs and disbursement of Government pension by ABs. Who are ABs? ABs mean all Public Sector Banks (PSBs), scheduled Private Sector Banks (PVBs), scheduled Payments Banks (PBs), and scheduled Small Finance Banks (SFBs) appointed by the RBI under Section 45 of the RBI Act, 1934, by mutual agreement, to carry out Government banking business of the Central Government (CG) / State Governments (SGs). What is agency commission? Agency commission means the remuneration paid by the RBI to an AB in consideration of it acting as an agent of the RBI in the conduct of general banking business of the CG and the SGs at the places and in the manner specified in the agreement between the RBI and the bank, with the exception of the functions relating to the management of the public debt. What are the guidelines on appointment of ABs? Any eligible bank which intend...
Post a Comment
Read more

Highlights of RBI Annual Report 2025-26 – Chapter 7 to 12

Reserve Bank of India (RBI) has published its annual report for the financial year 2025-26. In a series of articles, we will go through the highlights of the report. This is the fifth and final article in the series.  Chapter 7 – Public Debt Management The ways and means advances (WMA) limit for the Government of India (GoI) for H1:2025-26 (April to September 2025) was fixed at ₹1,50,000 crore and for H2:2025-26 (October 2025 to March 2026) was fixed at ₹50,000 crore. The RBI entered into an agreement with the Government of National Capital Territory of Delhi (GNCTD), under Section 21A(1) of the RBI Act, 1934, to carry on the general banking business of GNCTD and manage its rupee public debt. The WMA limit of GNCTD was set at ₹890 crore, taking the aggregate WMA limit of all the states / UTs to ₹61,008 crore. The RBI introduced Separate Trading of Registered Interest and Principal of Securities (STRIPS) in the state government securities. Retail Direct Gilt (RDG) account – An au...
Post a Comment
Read more