IFC to sell rupee-linked bonds to fund India investment

Image caption The Indian currency's recent weakness may make rupee linked investments more attractive

The International Finance Corporation (IFC), the World Bank's investment arm, plans to raise $1bn (£630m) by selling Indian rupee-linked bonds.

IFC will use the proceeds to finance "private sector investment in India".

It said the bonds, which will be sold outside India, will strengthen the country's capital markets and attract greater foreign investment.

Foreign investors have been sceptical of entering India amid uncertainty over policies and a slowdown in growth.

Analysts said the IFC bonds were likely to help attract investors who have been looking to enter India but needed assurance.

"This lends the weight of the credit rating of the World Bank to the potential investment," Vishnu Varathan, a senior economist with Mizuho bank told the BBC.

"By co-working with the World Bank you get some of the credit risks involved with India off the table."

'Attractive proposition'

The IFC move also comes at a time when the Indian currency has seen its value decline sharply.

The rupee fell more than 25% against the US dollar between May and September this year.

Though it has recouped some of those losses over the past weeks, it continues to remain weak - still down nearly 14% from its value in May.

Analysts said that given its weakness, a rupee-linked investment may be even more attractive to foreign players.

"From an investment point of view it is an attractive proposition," said Mr Varathan

"It looks like the rupee is beginning to turn a corner and any rupee denominated investment now is likely to benefit when it matures."

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