GOVERNMENT OF INDIA BOND RATES – AS ON 31^ST MARCH 2020

The yield rates below are comprised of Indian government bills and bonds. The rates given below are based on the benchmark FIMMDA (Fixed Income Markets and Derivatives Association of India) indices. FIMMDA is the nodal agency designated by RBI to set financial benchmarks, and the benchmarks are published by Financial Benchmark India Pvt. Ltd (FBIL), authorised by RBI for benchmark administration activities relating to the valuation of Government of India Securities

    G-Sec – Government of India dated Securities. 

    Yield indicates annualised yield as on 31^st March 2020. 

Sources: 

https://fbil.org.in/download.aspx?m=gsec&f=31032020.xls

NOTES ON BOND RATES

1. Discount rate used in Actuarial Valuation is based on bond yields as on end of balance sheet reporting period – as Per Para 83 of IND AS 19. Impact of change in assumption is recognised in Profit & Loss in case of AS 15 valuations, whereas in Ind AS 19 valuations it is recognised though OCI (post-employment obligations) and P&L will not be affected.

                       Figure 1: Government of India G-Sec Yield Comparison

2. Comparing 10 Year G-Sec yields between end of FY 2018-19 (29^th March 2019) and end of FY 2019-20 (31^st March 2020), we can see that the yield has reduced by 65 bps – from 7.47% to 6.82%. 

3. Comparing Short term (< 5 years) G-Sec yields of 29^th March 2019 and 31^st March 2020, we can see that there is a significant reduction in the bond yield. 

4. Comparing Long term G-Sec yields (15 years and above) of 29^th March 2019 and 31^st March 2020, we can see that the yield has reduced by about 100 bps.

5. The decrease in G – Sec yields will result in increase in the actuarial liability. 

6. Decrease in G – Sec yields will result in Actuarial Losses in Defined Benefits Obligations due to discount rate impact. Offsetting this impact by changing other actuarial assumptions like salary growth rate should be done cautiously by considering relevant factors including long term costs and practical feasibility of controlling it from HR perspectives , and after discussion with actuary and company HR executives and CFOs.  

Disclaimer: The information provided in this document is for informational purposes only, and the same may be incomplete, incorrect or outdated. None of the information provided herein should be used to replace official documents, nor shall it be used to substitute the advice of a qualified professional. Nothing herein constitutes a contract, an agreement or any other form of legal binding with the representatives of Armstrong International. No representative of Armstrong International is liable in any body of law, for anything stated herein. Any references herein do not imply endorsements or support of the referred products or services.