The Insurance Regulatory and Development Authority of India (IRDAI) has approved insurers' participation in Maharajah INR bonds issued by the New Development Bank (NDB), as reported by The Economic Times. In a circular dated August 27, the regulator granted permission following representation from NDB to permit insurers to invest in these rupee-denominated bonds. The bonds will have to comply with Government of India norms, while any public issue will require approval from the Securities and Exchange Board of India (Sebi). Insurers will also have to comply with Section 27E of the Insurance Act, 1938, which prohibits the direct or indirect investment of policyholders' funds outside India. The bonds can now form part of insurers' approved investments, subject to meeting rating criteria for approved investments and specific eligibility, rating, and infrastructure conditions that must be met.
NDB plans to raise ₹25,000 crore through the Maharajah INR bonds over a five-year period, according to The Economic Times. The bank intends to use the proceeds for general corporate purposes, including financing or onward lending to sustainable development, sustainable infrastructure, green and social projects in India. The regulator has provided separate category codes for these investments, with onshore rupee bonds carrying the EORB code and infrastructure-approved NDB bonds carrying the IORB code. The bonds must meet the rating criteria prescribed for 'approved investments' under IRDAI's investment regulations. Where Sebi exempts the bonds from the requirement of a rating from Sebi-registered rating agencies based on ratings assigned by international agencies, the equivalent rating will apply. This decision aims to enhance investment options for insurers while ensuring compliance with regulatory standards.
The regulatory approval comes amid challenging market conditions for government bonds, as reported by The Economic Times. On Thursday, investor appetite for Indian government bonds weakened due to fears of increased supply and concerns over RBI's liquidity stance. Treasury bill auction results reflected weak demand, driving yields upward. Life insurers are required to invest at least 50% in government securities, state government securities or other approved securities, and at least 15% in infrastructure and social sectors. Investments outside approved categories are subject to separate prudential limits prescribed by IRDAI. The NDB, the multilateral lender set up by the BRICS countries, had approached IRDAI to allow insurers to invest in its Maharajah INR Bonds.
IRDAI's July 2026 amendments have eased some investment norms, including allowing investments in private limited companies, infrastructure SPVs, AIFs and venture funds, as reported by The Economic Times. If proceeds from the bond issuance are invested in infrastructure, investments in these bonds will qualify as infrastructure investments. The regulator also stated that investments in the bonds will qualify as 'infrastructure investments' if the proceeds are invested in infrastructure subsectors notified under the Harmonised Master List issued by the Ministry of Finance. Market analysts predict interest rate hikes within the next year, with speculation building that the Reserve Bank of India may take steps to curtail excess liquidity in preparation for possible policy adjustments as inflationary pressures rise. This move could significantly impact the funding landscape for infrastructure projects in India.
