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After tasting success with a $ 1 billion offshore global bond programme linked to the rupee exchange rate, International Finance Corporation (IFC) has now trained its sight on an onshore rupee bond programme.
This private sector lending arm of the World Bank Group on Wednesday launched a $ 2.5 billion bond programme in local currency (rupee). The programme would be open for a five-year period.
IFC’s latest initiative has multiple firsts to its credit—it is the first time ever that IFC will issue onshore rupee-denominated bonds in India.
It will also be the first time that the entire proceeds from an IFC’s onshore bond programme will be used for infrastructure investments (in India).
The number of tranches or the size of each of the rupee bond offerings will depend on the supply of infrastructure projects that come for financing, said Keshav Gaur, who heads the Treasury Operations for IFC in Asia, Europe, Middle East and North Africa.
A combination of rupee-denominated bonds and swaps will be used to raise $ 2.5 billion over next five years, he said.
IFC’s rupee financing programme—involving rupee mop-up of about ₹ 15,000 crore—will deepen the Indian bond market and create a new momentum in development of corporate bond market and also a long-term bond market, Arvind Mayaram, Finance Secretary, said here on Wednesday.
This could open the doors for many others (foreign issuers) to tap the Indian market for local currency financing, he said.
He pointed out that Finance Minister Arun Jaitley had in his Budget speech announced that banks could issue long-term bonds to fund infrastructure.
Mayaram also urged IFC to enhance their participation in public-private partnerships, which India wants to develop further.
IFC’s Executive Director and CEO Jim-Yong Cai, who is currently visiting India, said bonds offered under IFC’s rupee financing programme offers a safe investment alternative for domestic pension funds and other investors, while mobilising capital to India’s infrastructure sector.
Cai, who met RBI Governor Raghuram Rajan in Mumbai on Tuesday, had a meeting with Finance Secretary Arvind Mayaram here on Wednesday. In July-June 2014 financial year, IFC invested $ 1.2 billion in India.
Last year, IFC invested almost $ 380 million to support infrastructure development in India.
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