Contact Your Financial Adviser Money Making MC
11
June 2018
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credit enhancement (The Total Investment & Insurance Solutions)
"India is launching a dedicated fund may
be next month to provide credit enhancement for infrastructure projects which
will help in upgrading credit ratings of bonds issued by infrastructure
companies and facilitate investment from investors like pension and insurance
funds," said Kumar Vinay Pratap, joint secretary (infrastructure, policy
and finance), ministry of finance (MoF).
He was speaking at an event here on private
sector participation in resource mobilisation organised by the MoF. Total Investment & Insurance Solutions
The initial corpus of the fund, to be
sponsored by IIFCL (India Infrastructure Finance Company), will be Rs 500
crore, and it will operate as a non-banking finance company, he said. Total Investment & Insurance Solutions
Pratap said there is a "mismatch"
at present, where bonds floated by infrastructure finance firms are typically
rated BBB, whereas regulatory agencies mandate a rating of at least 'AA' for
investments by the long-term pension and insurance funds. Total Investment & Insurance Solutions
He attributed the delay in fructification of
the budget announcement to the time taken in amending the NBFC-CE (credit
enhancement) notification by the Reserve Bank of India (RBI) and also getting
all stakeholders together.
IIFCL will hold a 22.5 per cent stake in the
NBFC, while the Asian Infrastructure Investment Bank (AIIB) has offered to pick
up a 10 per cent stake, Pratap said, adding that state-run SBI, Bank of Baroda
and LIC will also have stakes in the firm. Total Investment & Insurance Solutions
The joint secretary said the World Bank had
evinced interest to pump-in Rs 5,000 crore for the fund initially, but the
government declined it because it wanted to start small for proving the
concept. Total Investment & Insurance
Solutions
He said at present, the banking system does a
bulk of infrastructure project financing and exposes itself to asset liability
management (ALM) mismatches and hence, alternatives like raising of money
through corporate bonds is necessary.
It can be noted that the present state of the
banking system, where all the lenders are saddled with NPAs, will also make it
necessary to accommodate alternatives.
Pratap said bank lending to the infra segment
has slowed down in the past few years and the annual growth rates plummeted to
3 per cent between FY14 and FY17, against 43 per cent from FY2000 to FY13.
The NPAs from the segment have also ballooned
to 9 per cent in FY17, from 3 per cent in FY13, he said. Total Investment & Insurance Solutions
At present, only USD 110 billion is being
invested in infrastructure, against a requirement of USD 200 billion, leading
many analysts to classify India as an infrastructure deficit country. Total Investment & Insurance Solutions
However, he said there is a need for the
private sector to be more active on the infrastructure investment front.The Total Investment & Insurance
Solutions
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