SINGAPORE, Oct 9 (IFR) - IFC hopes to boost India's capital markets and attract greater foreign investment by launching a US$1bn offshore rupee bond programme, the largest of its kind.
The private-sector arm of the World Bank will issue rupee-linked bonds and use the proceeds to finance private sector investment in the country.
The first tranche will be launched in the next few weeks once arrangers are appointed, said sources with knowledge of the situation. In a few months, the entire USD1bn programme may be issued.
The settlement of the bonds will be in US dollars but they will be pegged to the rupee, meaning investors will be taking on currency risk. The entire amount received from these bonds will be repatriated to India by IFC.
The multilateral is also working with the Indian government for an onshore rupee issuance, sources said.
IFR reported last month that IFC had already sent out preliminary proposals to both local and foreign banks. An offering of bonds of 10 to 15 years for up to Rs10bn-Rs15bn (US$161m-$242m) is being planned in tranches.
However, it will be a while before a deal materialises. IFC requires special permission from the Reserve Bank of India to issue a rupee bond, as only India-registered entities can issue in the local market.
Such permission would not be difficult to secure as IFC initiated a similar proposal with the government in 2003, bankers said.