New Delhi: Government will start issuing 6.6 per cent tax-free bonds aggregating up to Rs 5,000 crore to investors from March 31, for the seven assured return schemes of Unit Trust of India (UTI) that are being prematurely closed this fiscal, a senior Finance Ministry official said today (Mar 8, 2004).

"We expect that more number of investors will prefer bonds to cash for the seven UTI schemes. The exact amount of cash outgo will depend on how many people opt for it," Joint Secretary (capital markets), U K Sinha, said on the sidelines of an insurance summit in Delhi.

If all the investors opt for bonds, Government has estimated it has to issue about Rs 5,000 crore worth of 6.6 per cent tax-free interest bearing bonds.

The bonds would be offered as a conversion option to investors of seven schemes -- Children Gift Growth Fund of 1986 (CGCF-86), Children Gift Growth Fund of 1999 (CGCF-99), Bhopal Gas Victims MIP 1992 (BGVMIP), Monthly Income Plan of 1998 and 1999, Rajlakshmi Unit Plans of 1994 and 1999.

"The payment date for the bonds would be set at March 31," Sinha said, adding budgetary allocation has been made for foreclosing these high-assured return schemes.

The Specified Undertaking of UTI (SU-UTI) is coming out with tax-free bonds.

UTI has obtained highest safety 'LAAA (SO)' rating from credit rating agency ICRA (Indian Credit Rating Agency) for the bonds.

The value of bonds provided would be equal to the assured value of the units as on March 31, 2004.