40944 Federal Register / Vol. 63, No. 147 / Friday, July 31, 1998 / Notices

Availability of Forms

The Postal Service expects the revised

hard copy PS Form 8125 to be available

to mailers this summer from local post

offices. The Postal Service is not

printing a hard copy Form 8125–C. Both

Form 8125 and Form 8125–C will be

available on the U.S. Postal Service

website at <www.usps.com> use by

mailers in creating facsimile documents.

A future Postal Bulletin article will

include both forms and language

revising references to these forms in the

Domestic Mail Manual.

Date of Use

Mailers are encouraged to begin using

facsimiles of the revised PS Form 8125

and the new PS Form 8125–C facsimile

(July 1998) immediately. Effective

January 10, 1999, mailers must use only

the July 1998 versions of Forms 8125

and 8125–C. Also effective January 10,

1999, Periodicals mailers may no longer

use Form 2866–IP, In-Plant Verification

for Second-and Fourth-Class Matter, for

publications paid under the CPP system.

Stanley F. Mires,

Chief Counsel, Legislative.

[FR Doc. 98–20520 Filed 7–30–98; 8:45 am]

BILLING CODE 7710–12–P

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Rel. No. 23331;

International Series Rel. No. 1148; 812–

11026]

Industrial Development Bank of India;

Notice of Application

July 24, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of an application under

section 6(c) of the Investment Company

Act of 1940 (‘‘Act’’) for an exemption

from all provisions of the Act.

SUMMARY OF THE APPLICATION: Applicant

Industrial Development Bank of India

(‘‘IDBI’’), an industrial development

financial institution, requests an order

exempting it from all provisions of the

Act in connection with the offer and

sale of its securities in the United States.

FILING DATES: The application was filed

on February 24, 1998. Applicants have

agreed to file an amendment, the

substance of which is included in this

notice, during the notice period.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

August 18, 1998, and should be

accompanied by proof of service on

applicant in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicant, c/o Davis Polk & Wardwell,

450 Lexington Avenue, New York, NY

10017, Attn: Pierre de Saint Phalle.

FOR FURTHER INFORMATION CONTACT:

Rachel H. Graham, Senior Counsel,

Christine Y. Greenlees, Branch Chief,

(202) 942–0564 (Division of Investment

Management, Office of Investment

Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from the SEC’s

Public Reference Branch, 450 Fifth

Street, N.W., Washington, D.C. 20549

(telephone (202) 942–8090).

Applicant’s Representations

1. Applicant, a specialized

development bank, was established in

1964 by the government of India

(‘‘Government’’) pursuant to the

Industrial Development Bank of India

Act (‘‘IDBI Act’’). Applicant states that

it is the largest industrial development

financial institution in India and is a

charge of coordinating the activities of

all institutions engaged in the financing,

promotion, or development of industry

throughout India. 2. IDBI has been designated as a

Development Bank under the IDBI Act.

As a result, IDBI’s financing objectives

are largely influenced by Government

policies. IDBI also has been designated

as a Public Financial Institution under

the Indian Companies Act of 1956,

which entitles it to certain benefits

under the tax code and other laws.

3. IDBI primarily provides direct

financing to traditional (e.g.,

manufacturing) and non-traditional

(e.g., tourism) enterprises for the

establishment, expansion,

diversification, and modernization of

medium and large-scale industrial

projects. IDBI’s other direct financing

activities include equipment loans and

leasing, asset credit, direct discounting

of bills of exchange and promissory

notes, foreign exchange loans, long-term

working capital loans, venture capital

financing, and short-term general

corporate financing. IDBI also provides

indirect assistance, such as loan

refinancing, through banks and various

regional financial institutions. IDBI

generally does not acquire loans or

investments in the secondary market

and has traditionally held its loans and

investments until their maturity.

4. Under the IDBI Act, IDBI has had

access to low cost funds from the

Government and the Reserve Bank of

India (‘‘RBI’’) for the purpose of granting

loans at concessional rates. IDBI also

has borrowed, directly and indirectly,

from such institutions as the World

Bank and the Asian Development Bank,

and it has contracted lines of credit with

the Export-Import Bank of Japan and

Government-sponsored export credit

agencies through European banks.

5. IDBI’s credit exposure to individual

companies or business groups is kept

below ceilings mandated by the RBI for

Public Financial Institutions (such as

IDBI) and for commercial banks. In

addition, IDBI generally does not bear

any exchange rate risk with respect to

its foreign currency loans, because it

matches the currency of the loans with

its sources of funds. In certain cases, the

Government bears the exchange rate risk

either as primary borrower under loans

from multilateral agencies or under

government-sponsored exchange risk

pools.

6. In addition to its lending activities,

IDBI underwrites securities issued by

industrial concerns and, to some extent,

subscribes directly to their capital

issues. Through its in-house merchant

banking division, IDBI provides feebased services such as capital market

issue management, loan/guarantee

syndication, and advisory services for

corporate restructuring, mergers, and

acquisitions. IDBI also offers foreign

exchange and debenture trustee

services. In addition, due to

deregulation of the Indian financial

sector, IDBI has established separate

subsidiaries to engage in commercial

banking, stockbroking, and asset

management.

7. IDBI is administered in accordance

with the provisions of the IDBI Act as

well as other provisions of Indian law

applicable to business enterprises. IDBI

also is subject to extensive regulations

by both the RBI and the Securities and

Exchange Board of India (‘‘SEBI’’). The

RBI regulates IDBI as a Public Financial

Institution and not as a banking

institution or trust company.

Specifically, the RBI regulates IDBI’s

commercial lending, issuance of

certificates of deposit and finance letters

of credit, and foreign currency trading.

IDBI adheres to RBI-issued capital

adequacy guidelines for non-bank

financial institutions, which are
Federal Register / Vol. 63, No. 147 / Friday, July 31, 1998 / Notices 40945

designed to protect the solvency of such

institutions by limiting the amount of

leverage that they may incur. IDBI also

is subject to specific RBI guidelines

relating to income recognition and asset

allocation, periodic reports, and rates

payable on ‘‘fixed’’ deposits (generally,

interest-bearing instruments).

8. The SEBI regulates IDBI’s

underwriting, merchant banking, asset

management, and debenture trusteeship

activities. The SEBI prescribes

conditions for the registration of these

activities and establishes standards of

obligations and responsibilities. SEBI

regulations also set forth requirements

for underwriters and underwriting

agreements, require the adoption of

codes of ethics, and prohibit conflicts of

interest and insider trading.

9. In 1995, the Government granted

IDBI the authority to raise equity capital

by issuing shares to investors, provided

that the Government’s share of IDBI’s

issued equity capital would not fall

below 51%. As of December 31, 1997,

the Government owned approximately

72% of IDBI’s equity capital.

10. IDBI proposes to offer and sell

equity and debt securities in the United

States. It will not offer or sell any such

securities unless (a) they are registered

under the Securities Act of 1933

(‘‘Securities Act’’), (b) in the opinion of

special United States counsel for IDBI,

there is an exemption from registration

under the Securities Act available with

respect to such offer and sale, or (c) the

SEC staff stats that it would not

recommend that the SEC take any action

under the Securities Act if such

securities are not registered. IDBI

intends to use the proceeds from any

sales of its securities in the United

States as an additional source of funding

for industrial development and general

corporate purposes.

11. Although IDBI does not expect

that the Government will guarantee

payments on the debt securities that

IDBI proposes to sell in the United

States, IDBI states that investors would

have the protection afforded by Indian

regulation of IDBI’s operations, the

requirements of the Securities Act, and

the antifraud provisions of the

Securities Exchange Act of 1934.

Applicant’s Legal Analysis

1. Section 3(a)(1)(C) of the Act defines

an investment company to include any

issuer engaged in the business of

investing, reinvesting, owning, holding,

or trading in securities, and that owns

or proposes to acquire investment

securities having a value exceeding 40%

of the issuer’s total assets. Section

3(a)(2) of the Act defines the term

‘‘investment securities’’ to include all

securities except: (A) government

securities; (B) securities issued by

employees’ securities companies; and

(C) securities issued by majority-owned

subsidiaries of the owner which (i) are

not investment companies and (ii) are

not relying on the exception from the

definition of investment company in

paragraph (1) or (7) of subsection (c).

2. As of December 31, 1997, more

than 76% of IDBI’s assets consisted of

obligations of borrowers to repay loans.

These obligations could be deemed to be

‘‘investment securities’’ within the

meaning of section 3(a)(2) of the Act. As

a result, IDBI may be deemed to be an

‘‘investment company’’ under section

3(a)(1)(C) of the Act.

3. Section 6(c) of the Act provides that

the SEC may exempt any person from

any provision of the Act or any rule

under the Act to the extent that such

exemption is necessary or appropriate

in the public interest and consistent

with both the protection of investors

and the purposes fairly intended by the

policy and provisions of the Act. IDBI

requests an order under Section 6(c)

exempting it from all provisions of the

Act.

4. IDBI states that rule 3a–6 under the

Act excludes foreign banks from the

definition of investment company under

the Act. A ‘‘foreign bank’’ is defined in

the rule to include a banking institution

‘‘engaged substantially in commercial

banking activity’’ which, in turn, is

defined to include ‘‘extending

commercial and other types of credit,

and accepting demand and other types

of deposits.’’ IDBI believes that it is

functionally equivalent to a foreign bank

because it offers financial services and

issues financial products similar to

those offered and issued by traditional

foreign banks, and it is subject to RBI

oversight, supervision, and regulation.

IDBI states, however, that because it is

not considered a commercial bank

under Indian law and, consequently, is

prohibited from accepting demand

deposits, it might not be eligible to rely

on rule 3a–6.

5. IDBI represents that RBI regulations

governing its activities are similar to

those governing commercial banks. The

principal differences between RBI’s

regulation of non-bank financial

institutions (such as IDBI) and banks are

that non-bank financial institutions are

exempt from RBI regulations relating to

minimum cash reserve ratios and

statutory liquidity ratios and from the

RBI’s authority over the appointment of

bank directors.

6. IDBI asserts that, as a development

financial institution designed to

promote and provide a source of finance

for industry in India, it is not within the

intent of the Act and its characteristics

differ from the types of entities at which

the Act was generally directed.

Applicant thus states that it satisfies the

standards for relief under section 6(c) of

the Act.

Applicant’s Conditions

Applicant agrees that the order

granting the requested relief will be

subject to the following conditions:

1. In connection with any offering by

IDBI of its securities in the United

States, IDBI will appoint an agent to

accept service of process in any suit,

action, or proceeding brought on the

securities and instituted in any state or

federal court in the City or State of New

York by the holder of any such

securities. IDBI expressly will submit to

the jurisdiction of the New York state

and United States federal courts sitting

in the City of New York with respect to

any such suit, action, or proceeding.

IDBI also will waive the defense of an

inconvenient forum to the maintenance

of any such action or proceeding. Such

appointment of an agent to accept

service of process and such consent to

jurisdiction shall be irrevocable until all

amounts due and to become due in

respect of debt securities have been paid

and until any equity securities offered

in the United States are no longer

outstanding. No such submission to

jurisdiction or appointment of agent for

service of process will affect the right of

a holder of any such security to bring

suit in any court that shall have

jurisdiction over IDBI by virtue of the

offer and sale of such securities or

otherwise.

2. IDBI will rely on this order only so

long as (a) its activities conform in all

material respects to the activities

described in the application; and (b)

IDBI continues to be regulated by the

RBI, SEBI, or other applicable Indian

regulatory authority as a financial

institution, as described in the

application.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20449 Filed 7–30–98; 8:45 am]

BILLING CODE 8010–01–M