10-year gilts to rollover SDS on the cards

The Government of India plans to issue marketable government securities of 10-year tenure to roll over 10 per cent of the outstanding balances under the special deposit scheme (SDS).

According to the sources in public sector banks, the outstanding balances will be mainly under six major SDS accounts amounting to a total of around Rs 7,000-7,500 crore. The smaller accounts will be paid in cash.

At present, the government is busy consolidating the figures due for redemption It has asked all the agency banks for this scheme to furnish fresh data as there has been a difference of around Rs 6,000-7000 crore between the figures available between the banks and the Government of India.

According to one of the agency banking sources, while deposits accrued under SDS during the said period run to around Rs 1,20,000 crore on the accounts of the government, banks have shown a higher figure.

The deposits on behalf of the government was then collected only by public sector banks as there were no private banks at that point of time.

The data is being collated by merging the two schemes of 1975 and 1981 for working out the amount to the paid back to the depositors.

The 1975 scheme was meant for funds and trusts while the government floated 1981 scheme for Life Insurance corporation, General Insurance corporation and Unit Trust of India.

The data compilation has become imminent as the scheme is coming up for redemption in 2004.

Special Deposit Scheme (SDS) was launched by the Central government on July 1, 1975 with the objective of providing better returns to non-government provident funds, superannuation and gratuity funds, surplus funds of the Life Insurance Corporation of India (LIC) and Employees' State Insurance Corporation, etc.

The scheme was originally launched for a period of 10 years but was extended for another 10 years in 1985, three years in 1995 and for a further five years in 1998.

The debut scheme used to offer an interest of 10 per cent per annum, followed by a hike of 100 basis points to 11 per cent in 1983 and another 100 basis points to 12 per cent in 1986.

It remained unchanged for almost 15 years after that. After several rounds of cut in the interest rate, the interest rate currently rules at 8 per cent per annum.