What is India Overseas Investment Corp Ltd (INOIC)?

What is India Overseas Investment Corp Ltd (INOIC)?

• India Overseas Investment Corp Ltd (INOIC) is the name of a proposed new company to be established by the Govt. of India. 
• It will be established under the Ministry of Finance and it will be on lines of a Sovereign Wealth Fund (SWF). 
• The seeds of INOIC were sowed at a meeting of PM’s principal secretary Pulok Chatterjee in March, 2013.

What INOIC will do?

• The main objective of establishing INOIC will be to invest in the ownership of natural resources assets overseas to create long-term resource security without drawing on the forex reserves that will continue to be managed by the Reserve Bank of India (RBI).
• INOIC will be therefore in contrast to the conventional sovereign wealth fund (SWF) traditionally floated by rich economies. 
• It would be patterned like the government’s holding arm and registered with RBI as a non-banking financial institution with a paid-up capital of Rs 10 crore. 
• The company will raise funds through rupee bonds of 15-20 years with sovereign guarantee. 
• State-run entities, banks and financial institutions will subscribe to these papers using their surplus funds. 
•  INOIC will use surpluses available with public sector units to acquire foreign exchange from the RBI at market-related rates for purchasing overseas assets.
• INOIC will not borrow from RBI and will purchase or swap its rupee funds with foreign currency from the central bank at market rates. This will ensure a market-oriented mechanism and avoid management of temporary surplus forex funds. 
• The formation of the company will follow changes in guidelines so that state entities don’t have to seek Public Investment Board’s approval if the quantum of overseas investment is within INOIC’s ambit. 
• The company will act as a single-window clearing and financing framework that will be faster and more responsive than the existing system involving multiple layers of approvals for overseas acquisitions.
• Essentially, it means ready cash for an entity acquiring assets abroad. 
• With INOIC, India will join a select group of economies such as US, Russia, China, South Korea, Singapore, Malaysia, Brunei, Qatar and UAE that have pushed overseas acquisitions and business through such funds.