Fitch's Indian arm to start rating IDFs
New Delhi: The Indian arm of global agency Fitch will assign credit ratings to IDF so as to help instill confidence among global investors and provide thrust to the infrastructure sector, the government said Monday.
"India Ratings has come out with a new product for rating of IDFs (Infrastructure Debt Fund). This is very important because this will give confidence to investors especially from overseas Sovereign Wealth Fund and pension funds and others," Department of Economic Affairs Arvind Mayaram said here.
"For them to be able to assess whether their investments in a particular IDF or another IDF would be able to give the kind of return they expect," he said.
The rating is going to be extremely helpful, he said after the MoU signing between eight banks and IL&FS Infrastructure Debt Fund.
A joint MoU was signed between eight public sector banks -- Allahabad Bank, Bank of India, Canara Bank, Central Bank of India, Indian Bank, Indian Overseas Bank, Oriental Bank of Commerce, UCO Bank and IL&FS Infrastructure Debt Fund for takeout finance.
This IDF is sponsored by Infrastructure Leasing and Finance Services Ltd, Life Insurance Corporation (LIC) and Hamon Group of Industries.
Mayaram said: "We are also now looking at some movement on the takeout finance side. Several IDFs have been set up.
"Today large number of banks have came together and they have signed an MoU with one of the IDFs for the purpose take out finance...Getting into future arrangement for stepping out of the project and allowing the IDF to step in."
This is extremely useful because it is going to help banks clean up their balance sheets, he said, adding that they would be ready to on-lend further to new projects.
During the 12th Five Year Plan, India requires USD 1 trillion for development of infrastructure in the country.
Mayaram said the banks would continue to play critical role in providing debt finance for the new infrastructure projects.
"And from that point of view, this particular agreement is of great value," he said.
Mayaram said there is need for second generation reforms for the infrastructure sector.
Without infrastructure investments, he added, it would be difficult to achieve the potential growth rate of 8 per cent for the country.
IDFs are expected to be medium for channelising much- needed long-term debt for financing infrastructure projects and also to help in the migration of project loans for operating assets from banks to the fixed income markets, an official statement said.
The government has actively facilitated the creation of the regulatory framework and establishment of an enabling environment, it said.
The IDF, sponsored by IL&FS Group, launched with initial corpus of USD 1 billion would go up to USD 5 billion in the medium term.
The first three schemes of Rs 500 crore each of IDF have been assigned rating of 'IND AAA idf-mf' by India Ratings.
The rating denotes highest strength of credit protection factors embedded in a fund's investment policies and the quality of the sponsors and investment managers.