Cost curbs IFC from raising Re funds

International Finance Corporation (IFC) has kept in abeyance its proposal to raise rupee resources as the prevailing interest rates make fund raising in India an expensive affair.

Apart from the rate of interest, IFC also has to taken into account the costs involved in buying foreign exchange cover as the rupee resources would also be deployed in other developing countries.

"IFC is not looking to raise funds from India for now since the cost is on the higher side," said Neil Gregory, manager-south Asia department, IFC.

IFC along with Asian Development Bank (ADB) had received permission from the Reserve Bank of India last year to raise funds from the Indian markets.

The resources raised in the country could be deployed outside the country.

Last month, IFC had issued 10-year bonds in the Chinese domestic currency (renminbi) to raise RMB 1.13 billion (about $140 million), Gregory said. The bonds carry a 3.40 per cent coupon rate.

ADB has made use of the permission to raise rupee resources.

In February 2004, it raised Rs 500 crore with a semi-annual coupon of 5.4 per cent to yield 17 basis points over the yield on 7.37 per cent Indian government paper maturing in 2014.

IFC treasury raises resources from international markets for lending in emerging markets. It also issues bonds in local currency markets to stimulate capital markets development in developing countries.

IFC's securities, which are rated AAA by Moody's and AAA by S&P, have been issued in 33 different currencies. IFC's funding programme for FY06 is around $2 billion.

India has IFC's third largest exposure. As of July 31, IFC's portfolio in the country consisted of investments in 79 companies, with a total exposure of $1.25 billion. In 2005-06, IFC plans to invest about $450 million in the domestic private sector companies.