RBI to issue IINSS-C

The Inflation Indexed National Saving Securities-Cumulative are specifically targeted towards the retail segment and come after an earlier attempt in the form of Inflation Indexed Bonds.
By Divyansh Awasthi |  02-12-13 | 
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Divyansh Awasthi is an Investment Analyst with Morningstar. He would like to hear from you, but cannot give financial advice.

The Reserve Bank of India, or RBI, will launch Inflation Indexed National Savings Securities-Cumulative, popularly known as IINSS-C, for retail investors in the second half of December 2013. This is in sync with the announcement made in the Union Budget 2013-14 to introduce instruments that will protect savings, especially those of the poor and middle classes, from inflation.

These bonds will be eligible as collateral for loans from banks, financial institutions and Non-Banking Financial Companies, or NBFCs. Early redemptions will be allowed after 1 year from the date of issue for senior citizens (those above 65 years 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, will be made only on coupon dates.

The bonds would be sold through all agency banks, including the Stock Holding Corporation of India Ltd, or SHCIL, in the form of Bond Ledger Account. The latter, or BLA, for each applicant will be maintained in the centralised depository on the RBI’s portal (E-Kuber). These banks would also act as interface for all customer services related to these bonds (such as receipts, repayments, recording change of address, nomination, transfer, early redemption, lien marking, etc.).

The RBI will decide on the issuance of non-cumulative Inflation Indexed National Saving Securities for retail investors in due course.

In a nutshell

Face value: Rs 5,000

Minimum investment: Rs 5,000

Maximum investment: Rs 5 lakh per applicant per annum

Tenor of bonds: 10 years

Interest rate: Linked to final combined Consumer Price Index [CPI (Base: 2010=100)]. Interest rate would comprise two parts - fixed rate (1.5%) and inflation rate based on CPI and the same will be compounded in the principal on a half-yearly basis and paid at the time of maturity.

The final combined CPI will be used as reference CPI with a lag of three months (i.e. final combined CPI for September 2013 would be reference CPI for all days of December 2013). In case of change in the base year, the base splicing method will be used.


  • Individuals
  • Hindu Undivided Family, or HUF
  • Charitable institutions registered under section 25 of the Indian Companies Act
  • 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)

Tax treatment

The tax treatment on interest and principal repayment would be as per the existing taxation provision. It is to be noted that quoting the Permanent Account Number is mandatory for investments amounting to Rs 50,000 and above. However, following exemptions with regard to PAN requirement will apply:
  • As per Income Tax Rule 114B, any person who does not have a PAN and who enters into any specified transaction shall make a declaration in Form No. 60.
  • As per Rule 114C, the requirement of PAN is not applicable to the person who has agriculture income and does not have any other income provided he makes a declaration in Form 61, non-residents as referred to in Section 2(30) of the Income Tax Act, and Central Government, State Government and Consulate Office.
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