RBI says next series of IIBs could be linked to CPI

The Reserve Bank on Monday said the soon-to-be-launched inflation index bonds (IIBs) could also be linked to consumer price index (CPI) in the future.“The new instruments to be issued down the line when perhaps CPI index stabilises, we may move over (to consumer price inflation). But currently, the choice is for WPI inflation for the current series which is going to be issued (on June 4),” Reserve Bank Executive Director R. Gandhi said.Mr. Gandhi, who oversees the internal debt management department, was speaking during a specially-arranged conference call with market participants to clear doubts surrounding IIBs, the first tranche of which is to be issued on June 4. The plan came to fruition after Finance Minister P. Chidmabaram in the FY 2014 Budget announced that RBI would launch inflation indexed bonds to help public hedge themselves against price increases at a time real interest rates are still negative, thus crimping their savings.IIBs are pursuant to the Budget proposal to “introduce instruments that will protect savings of poor and middle classes from inflation and incentives household sector to save in financial instruments rather than buy gold”.Both the government as well as the RBI are......