Centre may go for global sovereign bonds

Singapore (Agencies): Raghuram Rajan, India's chief economic adviser, is considering steps to boost foreign investment that may include the country's first global offering of sovereign bonds, according to bankers who attended a meeting at the Ministry of Finance last Friday. Rajan took the unusual step of summoning bankers from international firms to present their ideas as the rupee slumped to a new low of Rs 61.21 against the dollar. Those proposals included a range of options, from a global rupee bond to a US dollar fundraising targeted at non-resident Indians, as well as further reductions to withholding tax and the removal of overseas borrowing limits. Around 10 international banks attended the July 12 meeting with Rajan and Anup Wadhawan, Joint Secretary for Capital Markets in the Department of Economic Affairs. While bankers cautioned that discussions are at an early stage, the unusual meeting suggests that officials are at least considering a wider range of options as they seek to restore confidence in the currency. Calls for an international sovereign bond are nothing new in India, but have become louder in recent weeks as the rupee has slipped to new lows. The currency has lost more than 10 per cent against the US dollar since the start of May. Analysts have so far focused on the idea of an offering in US dollars. A global rupee bond, however, would be offered to overseas investors, and notionally denominated in rupees but settled in US dollars. That format would give India a hard currency boost while allowing overseas investors to take direct exposure to a currency that is not freely convertible. "Investors don't have to come down to India and set up a shop to take local currency exposure but just have to buy these bonds," said a banker who attended the meeting. "Timing-wise it may not be a great option, but still a $1 billion to $2 billion deal is doable. More crucially, this will offer India another avenue to tap investor demand," the banker added. Asking foreign investors to take rupee exposure at a time when the currency is declining may be a challenge, and Indian officials may well decide against such a move.