Govt. establishing INOIC : India’s sovereign wealth fund
The Government of India is establishing a company —India Overseas Investment Corporation (INOIC) — under the Ministry of Finance similar to a sovereign wealth fund to impart financial power for securing access to overseas natural resources.
What is INOIC?
India Overseas Investment Corporation (INOIC) will be like India’s sovereign wealth fund which will function as a development finance institution with the specific mandate to provide equity and debt to Indian public sector enterprises (PSEs) for securing natural resources abroad.
How would INOIC function?
INOIC would like the government’s holding arm and registered with RBI as a nonbanking financial institution with a paid-up capital of Rs 10 crore. The company will raise funds through rupee bonds of 15-20 years with sovereign guarantee. State-run entities, banks and financial institutions will subscribe to these papers using their surplus funds. It will not borrow from the RBI unlike IIFCL. The company will purchase or swap its rupee funds with foreign currency from the RBI at market-related rates. This will provide for a market-oriented mechanism and avoid management of temporary surplus forex funds. The formation of the company will follow amendments in guidelines so that state entities don’t have to seek Public Investment Board’s clearance if the quantum of overseas investment is within INOIC’s ambit. The company will act as a singlewindow clearing and financing framework that will be more expeditious than the current system involving multiple layers of approvals for foreign acquisitions. Basically, it means ready cash for an entity acquiring assets overseas.
Note: Formation of INOIC will place India into a select club of economies such as US, Russia, China, South Korea, Singapore, Malaysia, Brunei, Qatar and UAE that have pushed overseas acquisitions and business through such funds.