The Telegraph
Sunday , June 29 , 2014
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Vote for bonds as cash tool

Anup Agarwal in Calcutta on Saturday. Picture by Kishor Roy Chowdhury

Calcutta, June 28: International Finance Corporation (IFC), the investment arm of the World Bank, is betting on debt instruments such as non-convertible debentures as a prefered route for raising capital by non banking finance companies (NBFCs) and microfinance institutions (MFIs) in India.

“Recently we have started debt financing through NCDs to such NDFCs. We are looking at more financing opportunities through this route,” Anup Kumar Agarwal, senior investment officer of IFC, said on the sidelines of a seminar organised by the CII today. Non-convertible debentures are unsecured bonds that cannot be converted into equity.

Agarwal said IFC had recently financed a Rajasthan based NBFC — AU Financiers — and was in talks with other such non-banking institutions and MFIs for financing through the NCD route.

Even though the RBI has allowed NBFCs to raise capital through the external commercial borrowing route, several MFIs have not evinced interest because of the currency fluctuations in dollar denominated debt instruments. Instead, these companies have shown preference for raising debt through the NCD route, which are rupee financed.

Agarwal said IFC could only invest in dollar terms, as they did not have any India-specific balance sheet. He said in case of NCDs, dollars were converted in the spot market into rupees and invested by IFC as a foreign institutional investor.

He further said IFC was committed to increasing its investment in MFIs.

“We have invested in Bandhan and we are supporting other MFIs as well. We support the entities in terms of equity and recently we have started debt financing,” Agarwal said.

However, he said there was no immediate plan of hiking its stake in Bandhan, which has recently received a banking licence from the RBI. IFC has close to 11 per cent state in the city-based MFI.