RBI announces private placement of securities under UDAY scheme

The Banking regulator RBI had announced the private placement of securities for UDAY scheme adding further boost to the scheme.

UDAY Scheme

In this scheme, Centre allows state governments, which own discoms, to take over 75% of debt as of September 30, 2015 in 2 years and pay back lenders by selling bonds. For the remaining 25% dues, discoms have been allowed to issue bonds.

Flash points

• RBI has asked the interested market participants to subscribe for securities before March 30
• It has asked the interested applicants to apply through private placement approach through the Internal Debt Management Department
• The special securities under UDAY are being issued by governments of Bihar, Haryana, Jammu and Kashmir, Jharkhand, Punjab and Rajasthan
• The scheme is expected to help discoms save around Rs 8 lakh crore in the next three years
• It has been reported that the cumulative debt of discoms is Rs 37 lakh crore.
• Banks have been allowed to keep UDAY scheme bonds under the held-to-maturity (HTM) category.
• This will ease pressure on bond yields and debt market

Points to note

• UDAY- Ujjwal Discom Assurance Yojana
• The scheme was launched for the revival of debt ridden power distribution companies

Key points

• Power Minister– Piyush Goyal
• RBI Governor– Raghuram Rajan
• Headquarters– Mumbai