The government has earmarked about Rs 3,500 crore (Rs 35 billion) for foreclosing seven assured return schemes of Unit Trust of India but feels that cash outgo would be nominal going by the experience of flagship scheme US-64.

"Though we have apportioned Rs 3,500 crore for foreclosing the seven UTI schemes, we don't expect much cash outgo particularly after majority of investors of US-64 opted for the 6.75 per cent tax-free bonds," a senior finance ministry official told PTI in New Delhi on Thursday.

The seven schemes, which would be repaid before their maturity date are Monthly Income Plans of 1998 and 1999 (MIP-98 and MIP-99), Children Gift Growth Fund of 1986 and 1999 (CGGF-86 and CGGF-99), Rajlakshmi Unit Plan of 1994 and 1999 (RUP-94 and RUP-99) and Bhopal Gas Victims Monthly Income Plan of 1992.

The government has estimated a cash-outgo of Rs 6,500 crore (Rs 65 billion) for US-64 but it actually turned out to be less than Rs 2,000 crore (Rs 20 billion) as most investors opted for the tax-free bonds.

For the seven schemes coming up for foreclosure, the finance ministry has estimated a maximum Rs 3,500 crore outflow if all investors opt for encashment.

Investors can however opt for bonds, whose rate of return has been pegged lower at 6.6 per cent, which is 0.15 per cent lower than the previous bonds.

"The rate of return has been lowered as the yields on government papers have come down in the last few months. Even with this coupon rate, majority of investors may opt for the bonds," the ministry official said.

The ministry had already sought permission from the Securities and Exchange Board of India for foreclosing the schemes.