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(Precious) Words of Wisdom : "Rich people have small TVs and big libraries, and poor people have small libraries and big TVs." ~ Zig Ziglar

Inflation Indexed National Saving Securities announced

Last week, RBI announced the details of the much-awaited Inflation Indexed National Saving Securities for the retail investors; to be launched in the 2nd half of this month. These would be cumulative in nature and hence are designated as Inflation Indexed National Saving Securities - Cumulative or IINSS-C. Non-cumulative securities would be introduced in due course of time.

While the issue dates would be announced shortly, here are the salient features of IINSS-C.

Face Value: Rs.5000
Min Investment: Rs.5000
Max Investment: Rs.5 lakhs per person per annum
Tenor: 10 years

PAN No.: Mandatory for investment of Rs.50,000 or more (excepting a few exceptions)
Availability: With the banks and Stock Holding Corporation of India Ltd (SHCIL)
Eligibility: Individuals, HUFs, Trusts and Charitable Institutions

Rate of interest: 1.5% + Inflation rate  [So if inflation is 10%, interest rate would be 11.5%]
Inflation rate: Final rural+urban combined CPI (applied with a lag of 3 months) [So interest for Jan 2014 would be based on inflation in Oct 2013]
Compounding: Half-yearly

Early redemption: Permitted after three years (one year for senior citizens above age 65)
Early redemption dates: Only on coupon dates
Early redemption penalty: 50% of the last coupon 

Nomination: Permitted (for individuals)
Transferability: No
Loans: Allowed to pledge as a collateral

In tomorrow's post we will evaluate whether we should invest in Inflation Indexed National Saving Securities - Cumulative or not.

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