BoB, ICICI, LIC and Citi to float $2 bn infra development fund
New Delhi: Four financial institutions -- Bank of Baroda (BoB), ICICI Bank, LIC and Citi Financial -- Monday agreed to form the country's first USD 2 billion (about Rs 10,000 crore) Infrastructure Development Fund (IDF) to finance infrastructure projects in the country.
"This is the first IDF and will have an equity capital of Rs 300 crore. It will start operations in the next fiscal (beginning April 1, 2012) ... Total fund size would be USD 2 billion", Bank of Baroda (BoB) Chairman M D Mallya told reporters.
An MoU to set up the fund was signed by the representatives of the banks and financial institutions including Bank of Baroda (BoB) chief Mallya and ICICI Bank CEO and managing director Chanda Kochhar in presence of Finance Minister Pranab Mukherjee.
ICICI Bank, the sponsor of the joint venture, will hold 31 percent equity in the IDF followed by Bank of Baroda (30 percent), Citi Financial (29 percent) and LIC (10 percent).
The ICICI Bank has already received the Reserve Bank's in-principle nod to set up the IDF through the NBFC (non-banking financial company) route last month.
Concerned over poor infrastructure, the government has proposed to step up investment in the infrastructure sector to USD 1 trillion in the 12th Plan beginning April 1, 2012 from USD 500 billion in the Eleventh Plan. Of the total proposed investment, about 50 percent is expected to come from the private sector.
An IDF may be set up either as a trust or non-finance company. While the trust-based IDF (Mutual Fund) would be regulated by Sebi, an IDF set up as a company (NBFC) would be regulated by RBI.
According to RBI guidelines, IDFs to be set up as NBFCs should have a minimum net-owned fund of Rs 300 crore and a capital adequacy ratio of 15 per cent.
In his last Budget speech, Finance Minister Pranab Mukherjee had mooted the idea of IDFs to accelerate the flow of long term debt in infrastructure projects.
Besides, ICICI Bank, many other lenders including IIFCL, IDBI Bank are also planning to set up IDFs.