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Government plans bond guarantee entity

News:

  • The government plans to set up a guarantor for corporate bonds in an initiative aimed at boosting the market for such debt instruments by giving comfort to investors.
  • The proposed Bond Guarantee Corporation of India, which will have a net worth of around Rs 5,000 crore, is envisaged as a non-government entity with a 51% stake for the private sector.
  • The finance ministry has prepared a blueprint for setting up the company backed by government support.
  • The capital structure of the proposed firm will have 25% paid-up equity capital, of which government will hold less than 48% stake.
  • Since most of the expenses of this firm will be administrative in nature, it will be able to offer the guarantees at a lower fee, which will be a win-win situation.

Source:ET

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