The offer is being made by top hawala operators, market sources say. It works as follows: The hawala operator, who is the conduit for taking money out of the country, will subscribe to the bonds on request from a domestic client. The client can place an order by paying 10 per cent of the value up-front. For example, if the client wants to subscribe to the bonds worth $10 million, he/she needs to pay the rupee equivalent of $1 million to the hawala operators Indian associates. The balance amount will be financed by the hawala operator, who will ware-house the bonds for the client till the full payment is made at a later date.

Various repayment options are available forclients. The hawala operators are charging 12-13 per cent interest on the amount financed by him for a two-to-three year period. Once the full payment is made, the bonds are either transferred in the name of the clients NRI associates or gifted to the client in India.

The offer of part-payment is targeted at those who will take time to liquidate their un-accounted wealth in India and transfer the funds abroad through the hawala market. By then the bond issue could be closed as it is open only for a maximum of 30 days and many feel, that the issue may be declared closed on the 10th day itself, the earliest closing date.

Hawala operators are also investing large amounts in the bonds on their own with the idea of selling it at a premium to "needy" Indians at a later stage. The memories of the lucrative opportunity that the India Development Bonds (1992-97) had offered is still fresh on the minds of hawala operators. The premiums on the IDBs had soared to 20-25 per cent at the time of redemption as demandgrew from resident Indians keen on "white-washing" their un-accounted wealth.

Resurgent bonds offer identical features that made IDB a very cost-efficient money-laundering tool. Both the bonds are exempt from Income-tax, wealth-tax and gift-tax, and are permitted to be gifted to resident Indians.

The only cost for laundering money through this route will be the hawala premiums to be paid for transferring money out of the country. The hawala premiums are at present hovering about 5 per cent. Even that expense could be made up as the Resurgent bonds offer attractive coupons. At 7.75 per cent on dollar subscription, it takes care of the cost of the hawala premiums. In normal circumstances, any money-laundering exercise involves a cost of at least 15-20 per cent, sources said.

According to market sources, the Resurgent bonds are expected to witness large subscription towards the earliest closing date of the issue as hawala operators will be making most of their subscriptions then. The earliest closing dateof the issue is August 17.