The Government of India, in consultation with Reserve Bank of India(RBI), has announced issuance of Inflation Indexed National Savings Securities-Cumulative (IINSS-C) for retail investors by opening the subscription on December 23, 2013 and closing the subscription on December 31, 2013. The subscription can be closed earlier than December 31, 2013 with a prior notice.

Interest rate on these securities would be linked to final combined Consumer Price Index [CPI (Base: 2010=100)]. Interest rate would comprise two parts, i.e. fixed rate (1.5% per annum) and inflation rate based on CPI and the same will be compounded in the principal on half-yearly basis and paid at the time of maturity. The final combined CPI will be used with a lag of three months, i.e. final combined CPI for September 2013 will be used as reference CPI for all days of December 2013.

Early redemptions will be allowed after one year from date of issue for senior citizens (i.e. 65 years and above of age) and 3 years for all others, subject to penalty charges at the rate of 50% of the last coupon payable for early redemption. Early redemptions, however, can be made only on coupon dates.

The eligible investors would include individuals, Hindu Undivided Family, Charitable Institutions registered under Section 25 of the Indian Companies Act and Universities incorporated by Central, State or Provincial Act or declared to be a University under Section 3 of the University Grants Commission Act, 1956 (3 of 1956). As distribution/ sale of IINSS-C would be through banks, eligible investors may approach the branches of State Bank of India, Associate Banks, Nationalized Banks, three private sector banks (viz. HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd.) and Stock Holding Corporation of India Ltd. during their working hours.

Inflation indexed savings securities link returns to CPI with compounded accrual and restricted early redemption under penalty. IINSS-C are retail securities combining a fixed real rate and a CPI-based inflation rate, compounded half yearly into principal and payable at maturity, using the final combined CPI with a three month lag as reference. Early redemption is permitted only on coupon dates subject to minimum holding periods differing for senior citizens and others and a penalty equal to half the last coupon. Specified individuals and institutions are eligible to subscribe through designated banks and a stock holding agency within the announced subscription window.