Rupee rescue: Govt mulls global rupee bond mkt, say sources

The government is going all out in its bid to curb the rupee volatility. CNBC-TV18 learns from sources that investment bankers have submitted their recommendations on opening up of the global rupee bond market. This market, seen as an alternative to the ECB market, could develop alternate channels to bring in dollars, CNBC-TV18's Shereen Bhan reports.

Sources say JPMorgan, Goldman Sachs, SBI Capital and SBISG have submitted a working paper on global INR bonds to the finance ministry. There has been no final decision that is being taken by the government on whether or not to actually go ahead with an INR bond.
As per the working paper, the investment banks have recommended 5-10 year bond issues to open in the INR bond market, with USD 500-1000 million as the first tranche.
 
They have also recommended that the INR bonds be actually denominated in rupees, but settled in US dollars. They have suggested and recommended that the bond should actually be issued by a sovereign or a quasi-sovereign issuer. In this case, they have recommended very strongly that it should be India Infrastructure Finance Company (IIFCL) and IIFCL should actually be the debut issuer. Rationale
The INR bond market could be developed with an alternative to the external commercial borrowing (ECB) market. It could actually bring in long-term dollar inflows and hence sort of deal with the current account deficit (CAD) problem as well. The investment bankers also believe that since there is no sovereign bond paper, which is outstanding in the offshore market currently, it has a rarity value. A lot of central banks globally are mandated only to investment sovereign bonds and hence this could be an area of interest.
Source say the investment bankers strongly feel, and have suggested in their working paper as well on the basis of feedback from investors, that emerging market investors will have a significant appetite for a bond like this.
The government is looking very seriously at this possibility because it wants to explore all possible options now to curb the volatility in the rupee.