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QFIs may get to invest in corp bonds

Qualified foreign investors may be allowed to participate in the country’s corporate bond market through an exclusive window

Written by Surabhi | New Delhi | Published: May 3, 2012 12:59:30 am

Qualified foreign investors may be allowed to participate in the country’s corporate bond market through an exclusive window. The finance ministry is in talks with the Reserve Bank of India and market regulator Securities and Exchange Board of India (Sebi) to finalise the contours of the proposal.

“This will help deepen the corporate bond market,which is a long-pending reform. A separate window for foreign investors will ensure that they can avail the facility easily and will also ensure that there is closer monitoring of their participation,” an official close to the development said,adding that the proposal is at a nascent stage at present.

Finance minister Pranab Mukherjee,as part of the Union Budget 2012-13,had announced that Qualified Foreign Investors (QFIs) would be allowed to invest in the corporate bond market in order to deepen capital market reforms. At present,foreign investors in the form of foreign institutional investors can invest up to $15 billion in government bonds and $20 billion in corporate bonds.

The finance ministry is however likely to keep a cautious stance and allow only about $5 billion of investment from QFIs in corporate bonds. “The thinking at present is to open a small window. Depending upon the response,it can always be increased later on during the year,” the source said.

The move is expected to help Indian companies access funds more easily,especially at a time when many of them are putting their capital expansion plans on hold due to the high interest rate regime.

The proposal is also expected to ease concerns that the Centre’s heavy borrowing programme for 2012-13 will eat into private sector borrowing requirements. The government is estimated to raise a net of Rs 4.79 lakh crore in the current fiscal as against Rs 4.36 lakh crore in the revised estimates of 2011-12.

QFIs are individuals or organisations,resident in a foreign nation,who are compliant with various anti-money laundering forums. They have also been allowed to invest in equity markets since January 1 this year.

To ease access of funds for Indian firms

Finance ministry is in talks with the RBI and Sebi to finalise the contours of the proposal

At present,foreign investors in the form of FIIs can invest up to $15 billion in government bonds and $20 billion in corporate bonds

The finance ministry is however likely to keep a cautious stance and allow only about $5 billion of investment from QFIs in corporate bonds

The move is expected to help Indian companies access funds more easily,especially when many of them are putting their capital expansion plans on hold due to the high interest rates

Finance minister Pranab Mukherjee,as part of the Budget 2012-13,had announced that QFIs would be allowed to invest in the corporate bond market in order to deepen capital market reforms

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