States allowed to refinance maturing bonds

 In an attempt to prevent a Unit Trust of India (UTI)-like fiasco, where interests of small investors were jeopardised, the finance ministry has decided to allow states to borrow from the open market to meet the redemption pressure on guaranteed bonds subscribed by individuals and provident funds during the next three years.

 According to finance ministry officials, individual and provident fund subscriptions to state-guaranteed bonds, due to mature in the next three years, was to the tune of Rs 4,600 crore.

 Fortunately, retail investors and provident funds subscribed only to bonds issued by Maharashtra and Gujarat, they said.

 The officials said about Rs 15,800 crore was due to mature during this fiscal and the next two years. While individuals and provident funds accounted for almost 30 per cent of this, the balance was subscribed to by public sector banks, co-operative banks and financial institutions.