January 4, 1999
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Heroes,
Villains and Zeroes '98 NRI
BONDS The Resurgent India Bonds mops up Rs 1,760 crore, bolstering the country's forex reserves and dropping up the sagging rupee.
In the debt market, investors check on two things: if the rate of interest is high enough, and if the borrower has the capacity to repay. In August, when the State Bank of India (SBI) mopped up $4.16 billion (Rs 1,760 crore) from NRIs through the issue of the Resurgent India Bonds (ribs), what actually made the expatriates look to their homeland was the interest rate. At 8 per cent in pounds, it made the Manchandas of Manchester drool. The local pension fund didn't offer more than 6.5 per cent. But the allure of a bond is not merely the yield. With the rupee having lost 8 per cent against the dollar since the BJP-led alliance came to power, could the SBI's repayment ability be trusted upon? To allay these fears, the Central Government promised to cover the exchange- rate risk. M.S.Verma, the then SBI chairman, said "the NRIs are upbeat, they want to make India a strong and resilient nation". The Government was happy to find some extra cash to tide over the budget deficit, and a symbolic support from the NRI brotherhood to the Pokhran blast. Nobody fussed over the borrowing's high cost.
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With high interest rates and the
promise of covering the exchange-rate risk, the RIBs could get more than double the
targeted amount.
