THE Reserve Bank of India (RBI) plans to soon launch a 10-year savings instrument that will offer inflationlinked returns to small investors as an alternative to investing in gold.

It is proposed to launch inflation indexed national saving securities (IINSSs) for retail investors in November/December in consultation with the government, RBI said on Tuesday in its second quarter review of monetary policy 2013-14.

The inflation-indexed securities for retail investors will be linked to the new (combined) consumer price index (CPI). The interest on these securities would comprise of a fixed rate plus inflation.

Interest would be compounded half-yearly and paid cumulatively at redemption. These securities will be distributed through banks to reach out to the masses, RBI said.

Eligible investors would consist of individuals, Hindu undivided families, trusts and charitable institutions.

The Union budget for 2013-14 had proposed introducing instruments that would protect savings from inflation and provide an alternative to gold as an investment avenue for individuals.

Both the government and RBI have imposed a host of restrictions on the import of gold, one of the major reasons for the record high current account deficit in the previous financial year.

The central bank said that in order to develop the money and government securities markets, it has been decided to introduce cash settled 10-year interest rate futures (IRF) contracts.

The product design and operational modalities are being discussed with all stakeholders, including market bodies and stock exchanges.

After taking their feedback into account, RBI in consultation with Sebi, would issue guidelines by mid-November. The product is expected to be launched by the exchanges by end-December 2013, RBI said.