MoF approves government guarantee for IRFC bonds

The Ministry of Finance has approved a proposal to extend a government guarantee of Rs 50 billion for Indian Railway Finance Corporation (IRFC) bonds, to be subscribed by the Life Insurance Corporation [LIC] of India, to raise funds for the construction of various railway projects in the country. The sovereign guarantee fee for the amount has also been waived by the ministry. This decision is aimed at easing the flow of borrowed funds for the Ministry of Railways (MoR) and enabling LIC to subscribe to government-guaranteed bonds without any limit as per the Insurance Regulatory and Development Authority of India guidelines. This comes post the signing of the MoU between the MoR and LIC (in March 2015) for providing financial assistance of Rs 1.5 trillion during 2015-19 at 30 basis points above the 10-year benchmark yield.