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State Bonds: RBI Permits Separate Trading of Principal and Interest

13 June 20251 min read
BANKING & FINANCEState Bonds: RBIPermits SeparateTrading of Principaland Interest13 June 2025safalsetu.com

Why in the news

RBI extended to State securities a stripping facility already open for some GoI securities.

Key facts

  • Facility: principal and interest components of SGLs can be traded separately.
  • Objective: build primary and secondary markets, liquidity, price discovery.
  • Eligible bonds: fixed-coupon, issued by States or UTs, residual maturity up to 14 years, outstanding at least ₹1,000 crore.

Fixed-coupon bonds

The coupon stays constant through the bond’s life, giving predictable income, unlike floating-rate bonds.

Exam angle

  • Limits to recall: 14 years and ₹1,000 crore.
  • SGL = State Government Loan.

Test yourself

1. What maximum residual maturity applies to State bonds eligible for separate trading of principal and interest?

The facility covers instruments with residual maturity up to 14 years.

2. What minimum outstanding amount must eligible State bonds have under the facility?

The minimum outstanding amount is ₹1,000 crore.

3. Which type of bond does RBI's separate-trading facility for State securities cover?

It applies to fixed-coupon bonds of States and Union Territories.

This topic is part of Daily Current Affairs 13 June 2025 (15 topics).

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