New Development Bank set to tap rupee bonds to raise funds; issue next year

The long-term infra loans which the New Development Bank gives, have inherent currency risks and raising money locally will not require any hedging.

By: PTI | Aguada | Published:October 14, 2016 6:36 pm

The BRICS group-promoted New Development Bank is looking to raise funds by issuing rupee bonds to domestic investors to minimise currency risks in supporting long gestation infrastructure projects locally, a senior official said on Friday. “We hope to issue, perhaps by the first quarter of 2017, a bond denominated in the rupee,” NDB vice-president and chief risk officer Paulo Nogueira Batista Jr. told media on the sidelines of the BRICS Economic Forum here.

Without disclosing the amount the bank is targeting to mop up, he said the long-term infra loans which the NDB gives, have inherent currency risks and raising money locally will not require any hedging.

Deploying internationally raised funds can lead to a spike in the cost of project in case of currency volatilities, he said.

Economic affairs secretary Shaktikanta Das said: “They’re (NDB) looking at the possibility of floating a rupee bond in India. They’re already in discussion with us and the Reserve Bank. That’s one instrument of hedging the currency risk.”

The Asian Development Bank, he said, has already established the efficacy of such an option by raising money at a competitive coupon of under 6.5 per cent.

Set up last year, the Shanghai-headquartered NDB has already done a yuan issue in China to support its lending operations there. Batista said the NDB officers have already held multiple meetings on this with Indian officials.

NDB, headed by ex-ICICI Bank chief KV Kamath, has so far committed USD 911 million in various projects, including one clean energy project in the country.

Batista said it is targeting to deploy another USD 1.5 billion next year across all the five member countries –Brazil, Russia, India, China and South Africa. The forum is being held ahead of the 2-day BRICS Summit to be held here from Saturday.