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Liqun Jin
Vice-President
Asian Development Bank
27 February 2004
Mumbai, India

Good Evening, Ladies and Gentlemen,

It is my distinct pleasure to welcome you to this dinner reception to celebrate the successful completion of ADB's debut Indian rupee bond issue. This "Maharaja" bond issue could not have closed without the full support of the Government of India, Reserve Bank of India, and Securities and Exchange Board of India. ADB is very grateful for all the assistance they extended to this important transaction. ADB is proud to have participated in the development of the Indian capital market. The Government has been very successful in its capital market initiatives. We have all witnessed how remarkably the rupee bond market has grown in the last few years to become one of the largest and most vibrant in Asia. ADB will be honoured if this rupee bond issue can contribute to its further development.

I wish to commend the joint-lead arrangers, HSBC and ICICI Securities, and the co-arrangers, Bank of India and Union Bank of India, for their leadership, effort, and commitment in ensuring the success of this pioneering transaction. To our investors, please accept our gratitude for your strong support and participation on this issue.

As you may be aware, this bond issue represents many "firsts" in the Indian rupee bond market: first issue by a foreign entity, first supranational issue, and first issue rated triple-A by Fitch, Moody's and S&P. Just as important, this Maharaja issue also marks the first time that ADB has tapped the domestic bond market of a borrowing member country. As with its international counterparts, such as the Samurai bonds in Japan and the Yankee bonds in the United States, I have no doubt that the Maharaja bonds will similarly grow and become firmly established as part of the international financial landscape.

This pioneering transaction is part of ADB's continuing effort to promote the further development of domestic bond markets in the Asia-Pacific region. Bond markets play a crucial role in mobilizing domestic resources and channeling them efficiently to productive investments. This is vital to the continued success of the Indian economy, particularly given the immense financing requirements for its infrastructure development. Specifically, we hope that this rupee bond issue will contribute to the further development of the Indian bond market in the following ways.

First, by raising the profile of India's capital markets in the international financial community. ADB is one of the major supranational institutions, with a long-standing presence in the international capital markets. Just as many foreign issuers have followed ADB into the Samurai and New Taiwan dollar bond markets, after our first issues, we hope to have broken the ground now for other foreign entities interested in raising capital in India. As more foreign issuers enter, Indian investors will be able to diversify and choose from among more issuers and instruments.

Second, by setting new standards particularly in respect of regulatory framework, documentation, disclosure, clearing and settlement, and pricing benchmark. For example, ADB's rupee bond issue was priced, consistent with international best practice, through a bookbuilding process on a spread relative to the underlying government bonds. I understand that this is the first time such an approach has been used in the rupee bond market. ADB's rupee bond issue will also be the first transaction where coupon payments for the bonds will be made via wire transfers in lieu of checks.

Last but not least, by enhancing the liquidity in the domestic swap market. In connection with this issue, ADB plans to actively undertake interest rate swap transactions for asset and liability management purposes. Greater liquidity in the swap market should enhance the efficiency of the rupee bond market.

In addition to capital market development, ADB is also promoting private sector operations through this rupee bond issue. ADB intends to use the proceeds of this issue to lend in rupees to Indian entities in the private sector, primarily for infrastructure projects. A portion of the proceeds may also be used to lend in rupees to Indian entities operating in other sectors such as health care and housing finance. These rupee loans will provide the most effective protection against exchange rate risk, particularly as the revenues generated under these projects will be in rupees. ADB is fully committed to assisting its developing member countries promote private sector development, and will consider innovative approaches within and outside the region toward that goal. In our public sector operations, we think private sector development. In our private sector operations, we think development impacts.

With this Maharaja issue, ADB has achieved an important milestone in its strategy to contribute to the development of bond markets in its developing member countries. Going forward, we will be considering other local currency bond issues, particularly in those developing member countries where the bond markets are sufficiently developed and suitable projects with local currency financing needs can be identified. Currently, we are examining potential issues in the People's Republic of China and Thailand.

In closing, we ask your esteemed institutions to continue supporting and assisting in the development of the rupee bond market in the same spirit that led to the success of this Maharaja issue.

Congratulations to all.

Thank you.