To make funds available to the Indian Railways, the ministry of finance has approved government guarantee of Rs 5,000 crore for bonds to be issued by Indian Railway Finance Corporation (IRFC) before the end of this fiscal. These bonds will be subscribed by Life Insurance Corporation of India (LIC). In addition, the finance ministry has also waived the guarantee fee which otherwise IRFC would have paid, thus decreasing the cost of funds for the transporter. In March, 2015, the railways had entered into a memorandum of understanding (MoU) with LIC under which the country’s largest insurer will have provided financial assistance of Rs 1.5 lakh crore to the transporter between 2015 and 2019. However, despite a requirement to issue bonds worth Rs 30,000 crore per year to achieve the target, the issuance was much below that as LIC and the Insurance Regulatory and Development Authority of India sought government guarantee to safeguard the monies of insurance customers.
According to reports ,IRFC has so far raised Rs 16,500 crore from LIC over the past three years. Funds from LIC will be available to the railway ministry at 30 basis points above the 10-year benchmark yield. The current financial year has just two more working days left and the issuance of bond is likely within this period. “The ministry of railways will send the guarantee (documents) to LIC and IRFC will also send the request to take up bonds. Read More…
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