This is the third tap stock offered by the RBI in the current fiscal. On June 19, it offered two on-tap bonds -- 10-year and six-year papers carrying coupons of 12.10 per cent and 11.75 per cent, respectively. The RBI mopped up Rs 5,030.31 crore through the twin tap stocks.

By offering the three-year paper at a market-driven yield, the central bank is clearly giving a signal that the short-term interest rates are expected to move in line with the market, senior bankers said.

"The coupon of the three-year on-tap bond is identical to that of the three-year security auctioned earlier this month, 32 per cent of which devolved on the RBI," said an I-Sec official.

The tap stock will be issued for a minimum amount of Rs 10,000 and interest will bepaid half yearly. The stock will be eligible for ready forward facility. Payment for stocks will include, alongwith the nominal value of stocks applied for, accrued coupon from the date of commencement of tenure of the stock to the date of tendering application. Market sources feel that the centre's move to issue the three-year government security follows the good response the paper received at the RBI sale window. The RBI sold the three-year paper above par at Rs 100.07. "Even in the secondary market, the three-year paper is traded above par," said a dealer from a private bank.

Earlier this month, the RBI had signalled a steep hike in the short- and medium-term interest rates by hiking the coupon on three-year and five-year government stocks at the triple bond auction much above the secondary market yield.

At the auction, which was held on July 1, despite the high coupon rates, the RBI had to take 32 per cent devolvement in the three-year paper and another 48 per cent on the five-year stock. However, the12-year paper sailed through with no devolvement on the RBI.