The NCB facility was introduced by the Reserve Bank of India (RBI) to encourage retail participation in the primary market for Government securities and SDLs. NSE acts as facilitator in NCB to aggregate the bids received from the retail investors and submits a single bid to RBI. NSE has been offering G-sec and T-bills issued by central government from April 2018 to facilitate retail participation in these securities. Going forward, SDLs will also be offered to retail investors through this facility.
- Auction of Government Securities: Non-Competitive Bidding Facility to retail investors, as per RBI Circular RBI/2017-18/99 IDMD.1080/08.01.001/2017-18, dated : November 23, 2017
- Auction of State Development Loan as per RBI Circular RBI/2019-20/92 IDMD.No.1240/10.18.049/2019-20 dated: November 07, 2019
Scheme for Non-Competitive Bidding Facility in the auction of Government of India Dated Securities and Treasury Bills
With a view to encouraging wider participation and retail holding of Government securities, participation of eligible individuals and institutions is allowed on “non-competitive” basis in the auction of State Development Loans (SDLs).
For the purpose of this scheme, the terms shall bear the meaning assigned to them as under:
- ‘Retail investor’ is any person, including individuals, firms, companies, corporate bodies, institutions, provident funds, trusts, and any other entity as may be prescribed by RBI.
- Aggregator/ Facilitator’ means a Scheduled Bank or Primary Dealer or Specified Stock Exchange permitted to aggregate the bids received from the investors and submit a single consolidated bid in the non-competitive segment of the primary auction.
- Specified stock exchange’ means a SEBI recognised Stock Exchange, which has received No Objection Certificate (NOC) from SEBI to act as an Aggregator/ Facilitator in the primary auction segment.
Participation in the auctions on non-competitive basis will be open to retail investors who:
- do not maintain Current Account (CA) or Subsidiary General Ledger (SGL) account with the Reserve Bank of India;
- submits the bid indirectly through an Aggregator/ Facilitator permitted under the Scheme; and
- makes a single bid for an amount not more than 1 per cent of notified amount (face value) per auction.
- Regional Rural Banks (RRBs) and Cooperative Banks shall be covered under this Scheme in view of their statutory obligations.
- RRBs and Cooperative Banks that maintain SGL account and current account with the Reserve Bank of India shall be eligible to submit their non-competitive bids directly.
Non-competitive bids up to 10 percent of the notified amount will be accepted. The reserved amount will be within the notified amount. The minimum amount for bidding will be Rs.10,000 (face value) and thereafter in multiples of Rs.10,000 as hitherto.
- The retail investor desirous of participating in the auction under the Scheme would be required to maintain a depository account with any of the depositories or a gilt account under the constituent subsidiary general ledger (CSGL) account of the Aggregator/ Facilitator.
- Under the Scheme, an investor can submit only a single bid in an auction. An undertaking to the effect that the investor is making only a single bid will have to be obtained and kept on record by the Aggregator/ Facilitator.
Submission of Bids:
3.Each Aggregator/ Facilitator, on the basis of firm orders received from their constituents, will submit a single consolidated non-competitive bid on behalf of all its constituents, in electronic format, on the Reserve Bank of India Core Banking Solution (E-Kuber) system. Except in extraordinary circumstances such as general failure of the E-Kuber system, non-competitive bid in physical form will not be accepted.
Allotment of Bids:
4. Allotment under the non-competitive segment to the Aggregator/ Facilitator will be at the weighted average rate of yield/ price that will emerge in the auction on the basis of the competitive bidding. The securities will be issued to the Aggregator/ Facilitator against payment on the date of issue, irrespective of whether they have received payment from their clients.
5. In case the aggregate amount of bid is more than the reserved amount (i.e., 10 per cent of notified amount), pro rata allotment would be made. In case of partial allotments, it will be the responsibility of the Aggregator/ Facilitator to appropriately allocate securities to their clients in a transparent manner.
6. In case the aggregate amount of bids is less than the reserved amount, the shortfall will be taken to competitive portion of the notified amount.
Issue of Security:
7. Security would be issued only in SGL form by RBI. Therefore, the Aggregator/ Facilitator would have to indicate clearly at the time of tendering the non-competitive bids, the amounts (face value) to be credited to their SGL account and the CSGL account. Delivery in physical form from the main SGL account is permissible at the instance of the investor subsequently.
8. It will be the responsibility of the Aggregator/ Facilitator to pass on the securities to their clients. Transfer of securities to the clients shall be completed within five working days from the date of issue.
Commission/Brokerage charged to Clients
9. The Aggregator/ Facilitator can recover up to six paise per Rs.100 as brokerage/ commission/ service charges for rendering this service to their clients. Such costs may be built into the sale price or recovered separately from the clients.
10. In case the transfer of securities is effected subsequent to the issue date of the security, the consideration amount payable by the client to the Aggregator/ Facilitator will also include accrued interest from the date of issue.
11. Modalities for obtaining payment from clients towards cost of the securities, accrued interest wherever applicable and brokerage/ commission/ service charges may be worked out by the Aggregator/ Facilitator as per the agreement with the client.
12. It may be noted that no other cost should be built into the price or recovered from the client.
13. Aggregators/ Facilitators will be required to furnish information relating to operations under the Scheme to the Reserve Bank of India (Bank), as may be called for from time to time, within the time frame prescribed by the Bank.
The aforesaid guidelines are subject to review by the Bank and accordingly, if and when considered necessary, the Scheme will be modified in consultation with the State Governments.