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Business News/ Politics / News/  Govt issues oil bonds worth Rs22,000 crore
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Govt issues oil bonds worth Rs22,000 crore

Govt issues oil bonds worth Rs22,000 crore

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New Delhi: The finance ministry on Monday said that it would issue oil bonds worth Rs22,000 crore to public sector oil marketing firms and also changed investment guidelines for financial institutions to increase the marketability of the bonds.

Oil bonds held by banks can now be used to raise money from the Reserve Bank of India (RBI) under its repo facility (the window used by RBI to inject liquidity into the system), provident funds will be allowed to invest in them and insurers have been granted more flexibility to buy oil bonds.

But banks will not be allowed to use oil bonds to meet their statutory liquidity ratio, or SLR, requirements, the finance ministry release said.

According to the finance chief of a public sector oil marketing company, who did not want to be named before going through the fine print of the government’s announcement, mutual funds and state-owned Life Insurance Corp. of India were earlier the primary investors in oil bonds.

A trustee of the government’s Employees’ Provident Fund Organization, which manages about Rs2.17 trillion, said the fund is unlikely to immediately invest in the oil bonds as the interest rate of 8.20% for a 15-year term is relatively unattractive. “Banks are now offering certificates of deposits at better rates," the trustee, who did not want to be named, said. But if oil bonds are treated on par with Central government securities, EPFO might invest in them, he said.

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Published: 11 Nov 2008, 07:10 AM IST
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