Buoyed by the success of 6.75 per cent tax-free bonds offered to the US-64 investors, Unit Trust of India is likely to offer similar tax-free bonds but with lesser returns to seven assured return schemes, which are likely to be foreclosed from October end.

Unlike the tax-free bonds for the US-64, the bonds to be offered for the seven assured return schemes would carry an interest rate of 6.60 per cent, official sources said, adding that the scheme would be available only for those investors not opting for cash at the time of redemption.

But it is still higher than the tax-free government bonds with 6.5 per cent returns. The seven assured return schemes are MIP 99, MIP 98 (V), CCGF 86, RUP-II, CCGF 99, RUP 99 and BGV MIP.

This move comes after the resounding success of the government's earlier scheme, which envisaged 6.75 per cent return bearing bonds for investors having over 5,000 units of US-64.

For the investors, the bonds, which were issued in lieu of US-64, were tradeable and at present fetches higher price than the issued ones.

The government is hoping that there will be a good response to the proposed scheme whereby few investors would opt for redemption. The government then will not have to borrow too much money from the market and the consequent interest liabilities will also be less.

By issuing 6.75 per cent interest bearing bonds to the US-64 investors, the exchequer could save about Rs 2,000 crore (Rs 20 billion) from immediate redemption.

Moreover, with stock markets in a bull run, UTI's investments in equities could earn higher returns. This would again lessen the impact on payments.