‘Need to develop new finance instrument for infra’
The union finance minister, Pranab Mukherjee has emphasized on the need for developing new instruments such as credit enhancement for providing increased financing for infrastructure projects.
He was speaking after launching the Pilot transaction under Credit Enhancement Scheme, a major initiative of Indian Infrastructure Finance Company Limited (IIFCL). “This alternative mechanism of fund availability to infrastructure project developers would go a long way in development of infrastructure bond market through creation of new class of investors like insurance companies and pension funds,” he said, adding that this would also free-up banks’ capital for financing new projects.
On the occasion, the approval letter from IIFCL to the first pilot transaction under this scheme was handed over to GMR Jadcherla Expressway, an SPV of GMR group.
To further support the financing of infrastructure projects and smoothen the availability of credit to them, an MoU was also signed among IIFCL, LIC of India and seven major public sector banks namely State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank, Union Bank of India, and IDBI. This will help create a financing mechanism for direct financing of infrastructure projects. It will also enable developers to fast-track the achievement of financial closure and hence commence the construction of projects more quickly.
This mechanism would provide a single window to the developers to approach multiple lending institutions which would save time and money on appraisal and sanction of projects.
Another MoU was also signed between IIFCL and HUDCO on the occasion to support initiatives for infrastructure financing in India through joint pooling of respective complimentary resources and expertise of both the organizations.
Under credit enhancement, IIFCL in association with Asian Development Bank (ADB) would provide credit rating enhancement to the bond issue programme of an infrastructure company to make it an eligible investment grade instrument mainly for long-term investors such as insurance companies and pension funds through extension of partial credit guarantee.