FM may approve $ 5 billion fund for Indian M&A

The government is considering a sovereign investment fund with an initial corpus of $5 billion to acquire companies abroad. The investment fund may also be used to bolster the country's energy security by acquiring coal mines and oil and gas blocks abroad.

Prime minister Manmohan Singh has issued a directive to the finance ministry in this regard, and an announcement is likely in the Budget, an official said.

According to officials, one of the options available to the government is to create a special purpose vehicle (SPV), which will borrow funds from RBI in the form of long-term securities in foreign currency and lend the same to Indian companies at lower rates. Thus, RBI and the government will be able to earn more on forex reserves, which currently fetch average returns of 3.5-4%.

 

Categories: Economy, FII, Markets