Indian Railways News

IRDA for special status to Railways’ bonds

The Insurance Regulatory and Development Authority of India (Irda), Indian Railways and Life Insurance Corporation of India are in disagreement over the ‘status’ of the proposed borrowing by the Railways as the regulator demands that the funds belonging to millions of common insurers be ring-fenced as stipulated by regulations, two people familiar with the developments said.
“Irda wants the department of economic affairs to classify the railway bond as special bond, notifying this in a special gazette for LIC to invest Rs 1.5 lakh crore in the Railways,” said one of the persons cited above. The Railway Board, however, is of the view that investment in railways should come under the approved category of investment without the need for an explicit government guarantee.
The insurance regulator wants the government to back the bonds with a sovereign guarantee and a gazette notification. This would also ensure that it gets high investment grade credit rating, said those people who did not want to be identified.
Under this category, an insurance company can invest up to 70% of its AUM in instruments, including papers of AA investment grade and government securities. Such securities don’t necessarily need a government guarantee.

Such a move would reduce the cost of borrowing for the Railways, hedge LIC’s investment and expand its investment limit. The issue was discussed on Tuesday in a meeting of officials from the departments of financial services and the economic affairs, the Railway Board and the Irda. It was attended by Mritunjay Singh, under secretary in the department of financial services; K Kadiresan, from the investment department of LIC; Namita Mehrotra, executive director of Railway Board; and SN Jayasimhan  ..

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