RBI Sets Competitive Underwriting Commissions for Multiple Government Bonds, Ensuring Robust Market Support

The Reserve Bank of India (RBI) announced underwriting commission rates for several key government bonds, vital to the smooth execution of India’s borrowing programme. The commission is paid to primary dealers underwriting the government securities, ensuring full subscription in cases of underwhelming market demand.

For the 6.98% Sovereign Green Bond maturing in 2054, the underwriting commission is set at 0.0150 rupees per 100 rupees face value. Similarly, the 2055 bonds attract a commission of 0.0067 rupees, while 2032 and 2028 bonds have commissions of 0.0030 and 0.0015 rupees respectively. These rates are determined through competitive bidding in RBI’s underwriting auctions.

This underwriting mechanism provides a safety net for government securities, guaranteeing complete subscription and augmenting market confidence. Primary dealers, mandated participants in this process, play a crucial role in stabilizing government debt issuance and contribute to efficient market operations.

By setting precise and competitive commission rates, RBI balances dealer incentives with fiscal prudence, facilitating steady government financing and supporting the overall liquidity and credit environment in India.

Key Highlights

RBI sets underwriting commissions for sovereign bonds maturing 2028-2055.

Highest rate: 0.0150 rupees/100 for 6.98% Green Bond 2054.

Competitive bidding determines commissions, ensuring dealer participation.

Underwriting guarantees full subscription of government securities.

Primary dealers mitigate market subscription risks, vital for govt. borrowing.

Commission rates support RBI’s effective debt management and fiscal stability.

Sources: Reserve Bank of India notifications, Reuters