Editor’s note: This is general educational information about how the Indian government sells its bonds. It is not investment advice, it does not describe any current auction or security, and it is based on the official sources listed at the end.
Two bidders can win the same government bond auction on the same day at different prices, or at the same price, depending on one line in the auction notification. The Reserve Bank of India runs the sale of central government securities on behalf of the government, and the rule that decides what winners pay is chosen for each auction rather than fixed once. It is the difference between a Uniform Price auction and a Multiple Price auction, and it changes what a bid means.
Who bids, and where
Government securities are issued through auctions conducted by the Reserve Bank on E-Kuber, its core banking platform. Commercial banks, scheduled urban cooperative banks, primary dealers, insurance companies and provident funds that hold a current account and a Subsidiary General Ledger account with the Reserve Bank are members of the platform and bid directly. Everyone else, including non-scheduled urban cooperative banks, bids through a scheduled commercial bank or primary dealer acting as a primary member, holding their securities in a gilt account.
The calendar is published in advance. The Reserve Bank, in consultation with the government, issues an indicative half-yearly auction calendar setting out the borrowing amount, the range of tenors and the period in which auctions will be held, and a notification and press communique with the exact particulars of each security follow about a week before the auction date. Auctions of dated securities are conducted on Friday for settlement on a T+1 basis, so the securities are issued on the next working day. Treasury bill auctions are usually held on Wednesday for 91 day, 182 day and 364 day tenors, also settling on T+1, with a quarterly issuance calendar released in the last week of the preceding quarter. State development loan auctions are generally held on Tuesdays on the same platform. Results are published at a stipulated time, 1:30 PM for treasury bills and 2:00 PM for dated securities, or at half hourly intervals thereafter if there is a delay.
Yield based and price based bidding
An auction may be yield based or price based. A yield based auction is generally used when a new security is issued. Investors bid in yield terms up to two decimal places, the bids are arranged in ascending order, and the cut-off yield is the yield at which the notified amount is filled. That cut-off yield then becomes the coupon rate of the new security. Bidders at or below the cut-off yield are successful; bids above it are rejected.
The Reserve Bank’s own illustration, using an auction dated January 08, 2016 with settlement on January 11, 2016 and a notified amount of 1000 crore rupees, shows how the mechanics work. Bids run from 8.19% for 300 crore rupees through to 8.24%, and the notified amount is reached at the fifth bid, at 8.22%. Because a sixth bid sits at the same yield, those two bids are allotted pro rata, 50 crore rupees each, so that the notified amount is not exceeded. The two bids above the cut-off are rejected. With the coupon set at 8.22%, the corresponding prices run from 100.19 for the most aggressive bid down to 100 at the cut-off.
The allocation rule
Uniform price and multiple price describe what happens next. In a Uniform Price auction, all the successful bidders are required to pay for the allotted quantity of securities at the same rate, at the auction cut-off rate, irrespective of the rate quoted by them. In a Multiple Price auction, the successful bidders pay at the respective price or yield at which they bid. Applied to the same example, a uniform price auction allots everyone at the cut-off price of 100.00, while a multiple price auction allots bidder 1 at 100.19, bidder 2 at 100.14, and so on down the queue.
A retail channel sits alongside the competitive one. Under the non-competitive bidding scheme, an investor who does not hold a current account or Subsidiary General Ledger account with the Reserve Bank may bid through an aggregator or facilitator, which may be a scheduled bank, a primary dealer or a specified stock exchange submitting a single consolidated bid. Non-competitive allotment is capped at five percent of the notified amount, the minimum bid is 10,000 rupees of face value with further bids in the same multiples, and a retail investor may bid for no more than two crore rupees of face value per security per auction. In state development loan auctions the reservation is 10% of the notified amount.
Allotment in this segment is made at the weighted average rate of yield or price emerging from the competitive bidding, not at the cut-off, and the aggregator may recover up to six paise per 100 rupees as commission and nothing else. If non-competitive bids exceed the reserved amount, allotment is pro rata; if they fall short, the shortfall goes back to the competitive portion.
What a result sheet shows
The published result makes each of these steps visible. In the treasury bill auction dated Sep 02, 2026, the notified amounts were 9,000 crore rupees for the 91-Day bill, 8,000 crore for the 182-Day and 7,000 crore for the 364-Day. The 91-Day tranche drew 127 competitive bids for 29,550.360 crore rupees, of which 49 bids for 8,550.000 crore were accepted at a cut-off price of 98.7056 rupees, a yield of 5.2599%. The weighted average price came in above the cut-off at 98.7074 rupees, a weighted average yield of 5.2525%, which is the rate the non-competitive segment was allotted at. Three bids at the cut-off received a partial allotment percentage of 18.2536. Non-competitive bids of 1,966.295 crore rupees were received and 1,950.000 crore accepted. The same sheet shows cut-off yields of 5.6588% and 5.9090% for the 182-Day and 364-Day bills.
Analysis: what each rule asks of a bidder
The two formats push the bidder’s problem in opposite directions. In a multiple price auction, a bid that is too aggressive is punished directly: the bidder pays their own price and therefore pays more than the market clearing level for the same bond. That is the winner’s curse, and the rational response is to shade bids away from a bidder’s true valuation, which widens the spread of bids and can leave the tail of the auction looking thin. In a uniform price auction, the risk of bidding aggressively is removed, since everyone settles at the cut-off, so bidders can bid closer to their true valuations and the distribution of bids tends to compress. The trade-off is that the issuer gives up the extra revenue it would have collected from the bidders who were willing to pay more.
This is why the format is chosen auction by auction rather than legislated. The relevant variables are how well the security is understood and how confident bidders are about where it should clear. A new security whose coupon is being set in the auction itself, with no trading history to anchor bids, is a different problem from a reissue of an existing benchmark that trades continuously in the secondary market.
The non-competitive segment is where the two rules meet. Allotment there is at the weighted average of the competitive bids, which is not the cut-off in a multiple price auction and is by definition inside the range of accepted bids. A retail buyer in that segment is therefore not accepting the marginal price the auction discovered; they are accepting an average of what the professional bidders paid, plus up to six paise per 100 rupees of commission.
The structural context matters for reading any Indian auction result. The Bank for International Settlements has noted that the introduction of auctions for primary market based price discovery was one of a sequence of reforms, alongside the end of automatic monetisation and the Fiscal Responsibility and Budget Management Act 2003, that moved Indian bond markets to market determined interest rates, and that the Reserve Bank has not subscribed to primary issuances since April 2006.
It also notes what has not gone away: the statutory liquidity ratio, which peaked at 38.5% of banks’ net demand and time liabilities in 1990 and was brought down to 19.5% by the end of 2018, still means a large share of outstanding government bonds is effectively mandated to be held by banks, with insurers separately required to hold 20% for non-life and 25% for life of their assets in government bonds. A bid at an auction is placed by institutions with regulatory reasons to hold the paper, which is part of what the cut-off is measuring.
