Should India issue Soveriegn Bonds?

Yes No.
Articles supporting the topic
Yes
From E-Group, Banking-News
17
Govt bonds best to raise forex: SB
Sid!art!a
"!e "imes of ndia
#ub$is!ed on %u$& 1', ()1*
New +e$!i, %u$& 1,: State Bank of ndia !as suggested t!at a
sovereign bond issue is t!e best route for t!e government to
raise funds overseas, fending off possib$e pressure from t!e
finan-e ministr& t!at !as traditiona$$& opted to pigg&ba-k t!e
-ountr&.s $argest bank to raise debt abroad and bo$ster foreign
ex-!ange reserves/
0Getting a government-owned entit& to raise funds abroad is
no $onger t!e favoured ve!i-$e/ nstead, severa$ -ountries !ave
opted for sovereign issues,0 said a senior bank exe-utive, w!o
did not wis! to be identified given t!e sensitivit& of t!e issue/
ndonesia, 1exi-o, t!e #!i$ippines and even Sri 2anka !ave
opted for t!e route to raise overseas resour-es/
"!e statement -omes at a time w!en t!e government !as
begun to $ook at t!e issue afres! in t!e wake of dwind$ing
foreign ex-!ange reserves amid t!reat of a wit!drawa$ of
funds b& foreign institutiona$ investors/ 2atest 3eserve Bank of
ndia data s!owed t!at reserves fe$$ to a t!ree &ear $ow of
4(5) bi$$ion at t!e start of t!e mont!/
"!e government !as s!ied awa& from overseas issues wit!
ndia.s poor ratings being one of t!e ma6or !urd$es/ Besides,
ndia.s fis-a$ defi-it and -urrent a--ount defi-it !ave remained
!ig!, raising -on-erns in t!e internationa$ investor -ommunit&/
SB exe-utives said t!e government !ad -onsu$ted t!e bank
around two mont!s ago for a 7uasi-sovereign issue but t!e
$ender !ad arti-u$ated its position against t!e p$an/ 8!i$e
dis-ussions !ave revived in t!e -apita$, t!e -ountr&.s $argest
$ender is &et to !ear from t!e finan-e ministr&, t!e sour-es
-$arified/
SB -!airman #ratip 9!aud!uri !ad ba-ked a sovereign issue,
w!i-! ": reported on %une 15/
Bankers, !owever, ba-ked suggestions to bo$ster forex
reserves given t!e un-ertain e-onomi- environment in ndia as
we$$ as fears of wit!drawa$ of funds from emerging markets
su-! as ndia to t!e ;S, w!i-! is t!e midst of reviva$/ 0<ou
-an.t repeat w!at &ou did in t!e 1==)s or even 1) &ears ago,0
said an SB exe-utive/ "!e government used SB to se$$
3esurgent ndia Bonds >1==5? and t!e ndia 1i$$ennium
+eposits >())1? to raise resour-es abroad b& se$$ing bonds to
non-resident ndians/
0t is a -omp$i-ated and a -onvo$uted stru-ture w!i-! !as tax
issues and distribution-re$ated prob$ems/ 8e -an.t sa& we wi$$
on$& se$$ to N3s or peop$e of one nationa$it&,0 added anot!er
exe-utive from t!e bank/ @part from t!ese -on-erns, SB is
a$so worried about t!e potentia$ !it t!at t!e bank ma& !ave to
take due to a 7uasi-sovereign issue/ n ())1, fo$$owing t!e
1+, SB was for-ed to keep a -ertain portion of t!e 4'/'
bi$$ion issue in t!e form of -as! to meet t!e -as! reserve ratio/
n @pri$, nternationa$ 1onetar& Fund 1+ 9!ristine 2agarde
!ad to$d "!e E-onomi- "imes t!at t!e government -ou$d
-onsider a sovereign bond issue/ Some foreign bankers !ave
a$so supported su-! a move/
0"!ere is a $ot of demand for sovereign bond/ t is a good
t!ing, not from t!e point of view of t!e amount raised but it is
a ben-!mark w!ere !opefu$$& our rating a$so improves
be-ause sovereign !as a better rating/ "!e 9+S >-redit defau$t
swap? -urve be-omes mu-! better and t!at -an a-tua$$& be
$everaged/ #eop$e w!o -an a--ess -!eaper mone& abroad -an
use t!e sovereign -urve to pri-e t!e dea$,0 Bank of @meri-a
1erri$$ 2&n-! -ountr& !ead Aaku Nak!ate !ad to$d ": in an
interview ear$ier t!is &ear/
"!e bank was one of t!ose invited b& t!e finan-e ministr& for
dis-ussions on opportunities and options to raise resour-es/
Should India issue Soveriegn Bonds?
NO.
From E-Group, Banking-News
17
3B -!ief against Sovereign Bonds
"!e 9NB9-"B15
#ub$is!ed on %u$& *), ()1*
1umbai, %u$& *): @mid ta$ks of a sovereign bond issue, w!i-!
is $ike$& to attra-t overseas investments, t!e 3eserve Bank of
ndia >3B? governor - + Subbarao expressed reservation
against su-! move -iting t!e timing of t!e issue and its impa-t
on finan-ia$ stabi$it&/ "!e -entra$ bank on "uesda& de-$ared its
first 7uarter -redit po$i-& and kept rates un-!anged/
0@ sovereign bond issue wou$d -ompromise finan-ia$ stabi$it&,
and t!e -ost of a sovereign bond issue outweig!s t!e benefits
at -urrent 6un-ture/ Sovereign Bond ssue s!ou$d !appen at a
time of strengt!,0 +uvvuri Subbarao, governor of t!e 3eserve
Bank of ndia said in a post-po$i-& -onferen-e wit! reporters/
@ sovereign bond issue means, a -ountr& wi$$ issue bonds for
overseas investors w!o are expe-ted to invest in t!ose based
on -redit ratings and -ountr&.s fundamenta$s/ f ndia issues
su-! bonds wit! BB- ratings, it wi$$ get overseas -apita$, w!i-!
in turn, !e$p t!e rupee to gain against t!e ;S do$$ar/
Simi$ar$&, t!e governor was a$so against t!e idea of raising
$oans from nternationa$ 1onetar& Fund >1F?/ Spe-u$ations
are rife t!at t!e government is to&ing wit! t!e t!oug!t of
app$&ing a $oan from t!e wor$d bod&/ Ear$& 1==)s, t!e
government of ndia !ad soug!t t!e same to bai$ out t!e
-ountr& from utter finan-ia$ -run-!/ Forex reserves !ad !it 1/'-
( mont!s $ow/
n t!e po$i-& do-ument re$eased ear$ier toda&, 3B !ad
indi-ated t!at moderating w!o$esa$e pri-e inf$ation, prospe-ts
of softening of food inf$ation -onse7uent on a robust monsoon
and de-e$erating growt! wou$d !ave provided a reasonab$e
-ase for -ontinuing on t!e easing stan-e, but vo$ati$it& in rupee
emerged as ke& roadb$o-k in softening of rates/
03apid fa$$ in rupee put us in vi-ious spira$Ct!e weakening of
t!e rupee is t!e biggest risk to inf$ation,0 Subbarao said/
Ear$ier in t!e da&, t!e -entra$ bank it wou$d ro$$ ba-k re-ent
$i7uidit& tig!tening measures w!en stabi$it& returns to t!e
-urren-& market, enab$ing it to resume supporting growt!/
n t!e -onferen-e !e reiterated t!at t!e -entra$ bank wou$d
persist wit! forex steps ti$$ it gets resu$t/ De !owever agreed
t!at 3B was as anxious as ever&one e$se to ro$$ ba-k tig!t
$i7uidit& steps it !ad introdu-ed ear$ier t!is mont! to prevent
ex-ess vo$ati$it& in t!e foreign ex-!ange market/
"!e -entra$ bank !ad tig!tened $i7uidit& furt!er and made it
even !arder for $enders to a--ess funds wit! measures
in-$uding $owering t!e amount banks -an borrow or $end under
its dai$& $i7uidit& window/
Subbarao furt!er stressed t!at t!e -entra$ bank was anxious
to return to po$i-& supporting growt! and !e !oped t!at
situations -!anged soon/
From E-Group, Banking-News
1, 17
State Bank of ndia !ead #ratip 9!aud!uri sa&s
N3 bonds wi$$ not work in -urrent situation
"!e 3euters
#ub$is!ed on %u$& *), ()1*
1umbai, %u$& *): Bonds for non-resident ndians >N3? wi$$ not
work in -urrent market -onditions, State Bank of ndia -!ief
#ratip 9!aud!uri said on "uesda&/
1ost -ountries are now issuing sovereign bonds, t!e !ead of
t!e -ountr&.s $argest $ender said w!i$e speaking to reporters at
a post-po$i-& -onferen-e/
Ear$ier in t!e da&, t!e -entra$ bank $eft interest rates
un-!anged as it supports a battered rupee but said it wou$d
ro$$ ba-k re-ent $i7uidit& tig!tening measures w!en stabi$it&
returns to t!e -urren-& market, enab$ing it to resume
supporting growt!/
Govt has not decided on sovereign bond: Arvind
Mayaram
ECONOMIC TIMES
Government has not decided on issuance of sovereign bond overseas to finance the burgeoning
current account deficit, Economic Affairs Secretary Arvind Mayaram said on Thursday.
I!ve no idea ho" you have understood that there is going to be a sovereign bond. The Government
hasn!t said that "e are going to be #aunching a sovereign bond, so "hy is this $uestion coming again
and again,% he to#d re&orters after the 'eserve (an) of India!s board meeting here.
*e "as re&#ying to a s&ecific $uestion on the timing and $uantum of the much+ta#)ed about
sovereign bond issue.
There are ta#)s among the mar)et &artici&ants that the government may either se## sovereign bonds
or issue non+resident bonds to save battered ru&ee and fund current account deficit.
'u&ee has fa##en over ,- &er cent so far in this fisca# against the do##ar. The currency fe## to a #ifetime
intra+day #o" of .,./0 against the 1S unit on August ..
The country!s CA2, the difference bet"een fore3 inf#o"s and outf#o"s, touched an a##+time high of
4./ &er cent of gross domestic &roduct #ast fisca#.
'(I Governor 2 Subbarao had e3&ressed reservations over the issuance of sovereign bonds. Among
the menu of o&tions, sovereign bond issue is the #east &referred...that!s the '(I vie",% he had said
during an interaction "ith ana#ysts after first $uarter monetary &o#icy revie" on 5u#y 60.
7inance Minister 8 Chidambaram had said that the o&tion of sovereign bond issue "as on the tab#e,
but the Government "ou#d not rush into a decision.
*e had said the issuance of sovereign bond cou#d be considered by cash+rich &ub#ic sector entities.
Mean"hi#e, on issuance of N'I bonds, State (an) of India Chairman 8rati& Chaudhari reiterated his
&osition that such financia# &roducts are difficu#t to distribute in retai# and a#so to a &articu#ar ethnic
grou&.
FinMin says option open for a sovereign bond
issue
8TI
9Ste&s are ta)en by the government at the a&&ro&riate time!
:ith the ru&ee continuing to be a "orrying factor for the economy, the government, on Monday, said
the first sovereign bond issue in ,- years "as an o&tion before it to tac)#e fore3 vo#ati#ity. ... a##
o&tions are on the tab#e and are e3amined from time to time. Ste&s are ta)en by the government at
the a&&ro&riate time,% a 7inance Ministry statement said. The statement came amidst re&orts that
the government has momentari#y she#ved the o&tion of a sovereign bond issue to tide over the s#um&
in ru&ee against the 1.S. do##ar "hich had not on#y "idened the current account deficit, but a#so
strained domestic &rices.
NRI bond issue
The government had used N'I bond issue o&tion as a too# to stem ru&ee fa## on#y on three occasions
in the &ast ; in ,<<,, ,<</ and then in -00,. According to estimates, India can mo& u& =-0 bi##ion
from N'I bonds.
In order to raise foreign e3change to dea# "ith the e3terna# sector &rob#ems, India raised funds
through India 2eve#o&ment (onds in ,<<,, 'esurgent India (onds in ,<</ and India Mi##ennium
2e&osits in -00,. (an)s had raised =,.. bi##ion, =4./ bi##ion and =>.> bi##ion, res&ective#y, from the
bonds targeted at N'Is.
The ru&ee has de&reciated by over ,- &er cent against the do##ar since the beginning of the fisca#. The
Indian currency hit a #ifetime #o" of .,.-, to a do##ar on 5u#y /, forcing the centra# ban) and ca&ita#
mar)et regu#ator SE(I to ta)e unconventiona# measures to arrest the s#ide. The ru&ee on Monday fe##
by 6? &aise to c#ose at ><.?- fo##o"ing month+end do##ar demand from oi# im&orters and some
custodian ban)s cou&#ed "ith ca&ita# outf#o"s. 2uring -0,-+,6, the current account deficit hit a
record high of 4.? &er cent of G28.
@ey"ordsA 7inance Ministry, N'I bond issue, N'I bonds, sovereign bond