The instrument, denominated in US dollars, will be fully repatriable. The SBI sources said that the bond is likely to have a five-year maturity and carry an attractive market-driven interest rate. It will carry tax concessions similar to those currently available to the non-resident Indian (NRI) deposits. The bond's proceeds will be used to fund infrastructure projects.

The State Bank management is bullish about the success of the India Resurgent Bond. According to a highly placed source in the SBI, "The open-ended fund will be the most attractive feature of the scheme as it will provide an exit route option and NRI investors will be able to move in and out of the bond fund."

SBI Caps managing director AR Barwe told The Financial Express: "We are confident that we willbe able to raise more than $1 billion within a period of two months. Since the SBI has been given the mandate to issue the NRI bonds, we will be structuring the bond and handling the entire issue. These bonds will give fixed returns, tax-free, and will be in US dollars, which is the most attractive sop for the NRIs. The funds collected through this bond will be invested in infrastructure projects."

According to the SBI officials, the interest rate for India Resurgent Bond is likely to be fixed. "The floating rate may not be an attractive option for the NRIs," sources said. The tax exemption on the bond will be similar to exemptions currently offered on the foreign currency loans. According to the SBI officials, the special NRI bonds will garner more than the India Development Bond (IDB) issued in 1992.The India Resurgent Bond will offer features similar to the five-year IDB which was redeemed in 1997.

The IDB was offered by the SBI to individuals of Indian nationality and NRIs. The IDB offered an interestrate of 0.5 per cent above the three-year FCNR(B) rate which prevailed in 1992. The IDB's premature encashment was permitted only in non-repatriable Indian rupee. The entire first tranche of the bonds was raised by the SBI while other commercial banks with overseas presence and foreign banks joined hands to raise the second tranche, which was redeemed on February 15, 1997.