Special status for power bailout bonds sought
Power secretary P Uma Shankar confirmed to FE that the bonds to be issued by state governments would carry special security status to address the banks’ concerns. “We are given to understand this would eliminate a lot of doubts in the mind of banks and allow easier subscription of bonds,” he said.
The power ministry and department of financial services (DFS) had earlier proposed that these bonds be given the coveted statutory liquidity ratio (SLR) status — which make them fully tradeable and can be liquidated. However, the department of economic affairs expressed its reservations citing its impact on the government’s borrowing programme.
The demand for SLR status for these bonds was revived recently by the DFS following apprehensions raised by public sector banks. The banking regulator currently mandates SLR holding at a minimum of 23% of net demand and time liabilities invested in government and other approved securities.
It is understood that special security status would largely address the apprehensions of the banks.
Special securities are long-dated securities and can be relatively easily liquidated as these have
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