What changed
RBI, in consultation with state governments, launched a non-competitive bidding facility for State Development Loans starting August 25, 2009. NDS members can now submit a single consolidated electronic bid on behalf of clients, but must maintain detailed records and subject these bids to concurrent audit. Each non-competitive bidder is limited to one bid not exceeding 1% of the notified amount, and if total bids exceed the reserved 10% of notified amount, allotment is pro-rata.
What it means for you
This scheme broadens retail and small investor access to state government securities by allowing non-competitive bids through NDS members. Banks and primary dealers must ensure transparent allocation of securities in case of partial allotments. The move aims to deepen the state government bond market and improve participation from smaller entities.
What you must do
- Submit a single consolidated electronic non-competitive bid per auction on behalf of constituents via NDS.
- Maintain complete records of all non-competitive bids and subject them to concurrent audit.
- Ensure each non-competitive bidder submits only one bid not exceeding 1% of the notified amount.
- Allocate securities transparently to clients in case of pro-rata or partial allotments.
Who it affects
All NDS members (banks and primary dealers), Non-competitive bidders (retail and small investors), State governments issuing SDLs
What is the maximum bid amount for a non-competitive bidder?
Each non-competitive bidder can submit only one bid, and that bid cannot exceed 1% of the notified amount for that auction.
How is allotment handled if total non-competitive bids exceed the reserved amount?
The reserved amount is 10% of the notified amount. If aggregate bids exceed this, allotment is made on a pro-rata basis. Banks or primary dealers must allocate securities transparently to clients in case of partial allotments.