First-in-Kind Rupee-Linked Offshore Bond Program Debuts in India
IFC and the Indian government have delivered the largest, first-in-kind $1 billion rupee-linked off-shore bond program at a crucial time for India. In a pre-Annual-Meetings announcement by IFC and the Indian government, IFC EVP and CEO Jin-Yong Cai highlighted the breakthrough impact of the bond program and the rapid pace of delivery to a roomful of bankers, investors and government officials.
Game-Changing Move
Deep, liquid domestic capital markets and access to local currency finance are essential for a thriving private sector. The intervention is timely and a statement of confidence in the Indian economy at an uncertain time. IFC will issue bonds whose principal amounts will be linked to the Indian rupee exchange rate. U.S. dollar proceeds from the bonds will be converted to rupees in the domestic spot exchange market and then invested into India.
“IFC is the only institution in the world that we could have worked with for an initiative of this scale – it will strengthen India’s capital markets, bring back foreign investors and put international savings to use for India’s development,” said Dr. Arvind Mayaram, Secretary of Economic Affairs with India’s Ministry of Finance.
IFC's objective is to deepen the off-shore rupee bond market so that IFC and other investors can raise rupees to invest in India. IFC will issue a series of these bonds and invest the proceeds in government and corporate bonds. The proposed program amount is up to a billion dollars, with tenors of up to ten years.
A Partnership with Impact
The offshore bond program will have important benefits for the Indian capital markets, including:
- Bringing liquidity and depth to the offshore rupee market
- Crowding in foreign investors to invest in rupee bonds
- Encouraging other issuers to offshore markets
- Paving the way for an alternative source of funding for Indian companies
- Providing alternative hedging mechanisms for foreign investors
The program is reflective of the strong partnership between India — a country with IFC’s largest committed portfolio — and IFC. Last fiscal year, IFC committed $1.4 billion in India along the strategic priorities of promoting inclusive growth, particularly in India’s low income states, addressing climate change, and supporting economic integration.
The intervention, achieved in record seven weeks, from concept to design and launch, will serve as a much-needed stimulus to an economy with the potential and ability to renew growth at a time of uncertainty and slow growth.