IFC plans to raise $1 billion from rupee-linked bond programme for projects in India

MUMBAI (Reuters) - The World Bank's private sector arm, International Finance Corp., plans to launch a $1 billion rupee-linked bond programme within weeks to raise money internationally for private projects in India.

IFC officials said the bonds' maturity had not been finalised but the programme could include tranches of two or three-year paper initially followed by long-term bonds.

The coupon and settlement of the bonds will be in dollars but the proceeds will be converted into rupees and allocated to private sector projects in India, IFC officials told Reuters by telephone.

"The bond coupon and the FX exchange rate will all reflect the Indian rupee's fundamentals," said Jingdong Hua, vice-president, Treasury and Syndications at IFC, World Bank Group.

The rupee has rebounded by more than 11 percent since hitting a record low of 68.85 against the dollar on August 28 after being hammered earlier this year on concerns about India's gaping current account deficit and expectations for reduced capital inflows to India once the U.S. Federal Reserve starts to scale back its stimulus programme.

Investors in the bonds will bear the exchange rate risk, but are likely to benefit from a wide interest differential between India and the United States.

Hua said demand was likely to be strong due to IFC's AAA credit rating.

IFC is also in talks with the Indian government about setting up an onshore bond programme, but officials did not elaborate.

IFC invested $1.4 billion in India in the last financial year which ended in March. (Reporting by Neha Dasgupta; Editing by Susan Fenton)