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Thursday, 21 August 2014

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Irda allows insurers to invest in onshore rupee bonds of ADB, IFC

Insurance Regulatory and Development Authority (IRDA) has allowed insurance companies to invest in onshore rupee bonds issued by Asian Development Bank (ADB) and International Finance Corporation (IFC), an arm of the World Bank.

IFC had sent a representation to Irda to permit insurers to invest in onshore rupee bonds to be issued by it. IFC proposes to raise $5 billion in the next 10 years through rupee bonds and the proceeds would be used to fund IFC’s projects in India that require rupee financing.

The Centre has “onshore rupee bonds” issued by multilateral institutions such as Asian Development Bank and IFC as securities. Irda said that in light of this, it examined IFC’s request and decided that onshore rupee bonds issued by Asian Development Bank and IFC are ‘approved investments’.

The regulator said these bonds would be duly approved by the sectoral regulator (Securities and Exchange Board of India or SEBI). The proceeds of the issue shall be meant for investment in India.

Further, these bonds are required to meet the rating criteria to qualify as ‘approved investments’ prescribed by IRDA’s investment regulations as amended from time to time. If SEBI exempts the rating requirement from rating agencies registered with SEBI in view of the rating obtained from International rating agencies, then such rating shall be considered for classifying as ‘approved investments’.

Also, these investments shall be classified in line with the National Industrial Classification for the sectors to which the said tranche belongs. For example, if most of the proceeds of a tranche are meant for Infrastructure, then such investments shall be treated as exposure to infrastructure. If the same is not identifiable, then the exposure shall be treated as exposure to the BFSI (banking, financial services and insurance) sector. The valuation of these bonds shall be in line with corporate bonds and debentures.

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