Indian Rupee currency
Indian Rupee currency [Representational Image]Reuters

International Finance Corporation (IFC), the World Bank's private-sector financing arm on Wednesday launched bonds worth $2.5 billion in the Indian market to fund infrastructure projects and private energy and to boost energy supply over the next five years.

IFC's bond programme has come up after the government and RBI stepped in to attract foreign investors in the local bond market.

"Bonds offered under IFC's rupee financing programme offer a safe investment alternative for domestic pension funds and other investors, while mobilising capital to address India's infrastructure needs," said Jin-Yong Cai, IFC Executive Vice President and CEO, in a statement.

IFC invested $1.2 billion in India during the 2013/14 fiscal year that ended in March.

"Issuance of onshore bonds by IFC in the Indian bond market, with offer of longer-tenor bonds, will deepen the bond market," Reuters quoted Finance Secretary Arvind Mayaram.

The forthcoming top-rated offering is expected to boost interest in India's debt market and will help draw long-term funds from the insurance and pension sectors.

Finance Minister Arun Jaitley announced the decision to allow international settlement of Indian debt securities in his 10 July budget. "I propose to advise financial sector regulators to take early steps for a vibrant, deep and liquid corporate bond market and deepen the currency derivatives market by eliminating unnecessary restrictions," he had said in his speech.

Bonds and Funds:

Onshore bonds are issued by foreign entity in the local market with local currency with an aim to develop the local market. Asian Development Bank made such issue of bonds in 2004, reported Economic Times. Indian rupee bonds that are issued outside India are offshore bonds.

Issuer like IFC will be able to raise funds at fine rates and these funds will be lent to private borrowers by IFC at competitive rates.