The Hindu : Kerala News : State planning to float NRI bonds

Online edition of India's National Newspaper
Wednesday, Aug 11, 2004

Kerala

Kerala

State planning to float NRI bonds

By Biju Govind

KOZHIKODE, AUG. 10. The United Democratic Front (UDF) Government is planning to float a Non-Resident Indian (NRI) Development Bond with a view to mobilising alternative resources in the State.

Highly placed sources told The Hindu today that the Government was working out the modalities of the bond issue. The Finance Minister, K. Sankaranarayanan, the Non-Resident Keralites Affairs (NoRKA) Minister, M. M. Hassan, and the Finance and NoRKA Secretaries held a round of discussions in this regard in Thiruvananthapuram recently.

The Chief Minister, A. K. Antony, will formally launch the issue at the Global Non-Resident Keralites Meet to be held in Dubai ahead of Ramzan.

The Union Minister of State for Non-Resident Affairs, Jagdish Tytler, and the Union Minister of State for External Affairs, E. Ahamed, would attend the event, sources said.

6.8 p.c. interest

The NRI bonds would be similar to the Kerala State Development Loan floated with the objective of utilising it for the debt swap of the Government. Consent of the Central Government would be required for the venture under Article 293(3) of the Constitution. The bonds would be sold through the Reserve Bank of India (RBI) offices in Mumbai and Thiruvananthapuram, the sources said.

One of the salient features of the issue would be that the bonds would carry reasonable interest rates. These would be a great relief for Non-Resident Indians (NRIs) as it would ensure interest rates between six to eight per cent.

The sources said the State would benefit largely from the recurring investments of the earnings from the bond unlike the foreign institutional investors and banks which repatriate their profits. Besides, the idea of taking loans from the World Bank and the Asian Development Bank could be dropped completely.

Only for projects

The sources said the NRI bonds would be floated for purely financing high-yielding long-term infrastructure projects like ports, highways and airports. No money would be spent on revenue expenditure such as paying salaries and pensions of government employees.

While the NRIs would be participating in infrastructure building in the State by investing in these bonds, they would prevent the outflow of huge funds to external agencies. Such bonds would encourage savings by the expatriates and strengthen the State's economy. The remittances in Kerala come to Rs.21,900 crores a year. The State received Rs.1,00,000 crores during the past 25 years since the migration to the Gulf started.

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