The government has decided to issue 10-year tax-free bonds to banks and financial institutions and raise Rs 10,000 crore to bail out the Unit Trust of India (UTI).
Top government officials told Business Standard the bonds could carry a coupon rate of 7-7.5 per cent a year and could be redeemed in the last three years before maturity. The cost to the exchequer is likely to be of the order of Rs 420 crore a year, that is the interest liability which the Centre will have to take on its books every year based on a coupon rate of 7 per cent.
