MUMBAI, JAN 28: The government has been pulled up for virtually wasting the proceeds of last year's Resurgent India Bonds (RIBs) by Murli Deora, chairman of the Standing Committee on Finance. While the Reserve Bank of India (RBI) incurs a cost of around 12 per cent in raising funds in India, it is parking the proceeds of the RIBs at much lower rates abroad.

Deora also pointed out that despite assurances that RIB funds would be used for infrastructure purposes, there is still no control or directive from the Government to ensure appropriate end-use. When contacted, Deora said, several infrastructure projects in India are borrowing at an effective rate of around 8-10 per cent (in dollar terms). "What sense does this make, when the government is earning less than 5 per cent for its huge forex reserves. It is vital that, apart from even just the RIBs, some part of the reserves are used for developmental imports -- the country will benefit."

Of the $ 3.5 bn (Rs 14,875 crore) RIBfunds that are available with the State Bank of India, which actually raised the funds abroad, less than Rs 2,000 crore has been lent to the financial institutions such as IDBI and ICICI for lending to infrastructure projects. Another Rs 7,500 crore has been lent to foreign banks at an interest rate of 9.5 per cent, and these banks, according to Deora, are probably lending this for financing cars and other durables.