New RBI Grade B 2025 Notification will come Soon! Enroll Here

    Question

    In June 2025, RBI allowed STRIPS trading to state

    government bonds meeting certain residual maturity and outstanding amount requirements . Which of the following is the correct full form of STRIPS?  
    A Separate Trading of Reserved Interest and Principal of Securities Correct Answer Incorrect Answer
    B Separate Trading of Restructured Interest and Principal System Correct Answer Incorrect Answer
    C Separate Trading of Reserved Interest and Principal of System Correct Answer Incorrect Answer
    D Separate Trading of Registered Interest and Principal of Securities Correct Answer Incorrect Answer
    E Separate Trading of Restricted Interest and Principal System Correct Answer Incorrect Answer

    Solution

    STRIPS stands for Separate Trading of Registered Interest and Principal of Securities . These are securities created by convert ing a bond’s periodic coupon payments and the principal into individu al 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.

    Practice Next