RBI allows STRIPS trading of Government bonds and

Solution

STRIPS stands for Separate Trading of Registered Interest and Principal of Securities. These are securities created by converting a bond’s periodic coupon payments and the principal into individual l zero-coupon instruments. Each of these can be traded separately, allowing investors to buy specific cash flows instead of the entire bond. For example, a 10-year SDL offering annual interest of Rs 70 and repaying Rs 1,000 in principal at maturity could be split into eleven separate securities - ten interest payments and one principal payment.