New financial products needed to push infrastructure development: FM
New Delhi: Development of infrastructure and expansion of financial products such as Infrastructure Debt Funds (IDFs) and takeout finance are crucial to the country achieving 8 percent growth, Finance Minister P Chidambaram said here on Tuesday.
"...To give thrust to investment in infrastructure sector and to attain GDP growth rate of 8 per cent, there is an immense need for financial products such as IDFs, Takeout Finance and Credit Enhancement scheme to fill the financial gap in the infrastructure sector," he said after launching USD 1 billion IDF scheme of IIFCL here today.
"For Infrastructure Debt Funds (IDFs), we should try to mobilise resources from insurance and pension sectors as these funds are available for long term horizon," he said.
The Finance Minister also handed over in-principle approval letters issued by IIFCL Asset Management Company Limited (IAMCL) to one power project in Jharkhand and one rural water project in Andhra Pradesh. Both the projects are in operational phase.
IAMCL, a mutual fund promoted by India Infrastructure Finance Company Limited (IIFCL) signed a Memorandum of Understanding (MoU) with three public sector banks and two financial institutions - IIFCL and HUDCO- to launch the maiden IDF.
This is aimed at catalysing investments by way of securitised debt instruments of infrastructure projects.
Canara Bank and HUDCO are the strategic investors of the fund while Corporation Bank, Oriental Bank of Commerce and IIFCL are other investors.
The IDF scheme will mainly undertake investment in debt securities or securitised debt instruments of infrastructure companies, infrastructure capital companies or infrastructure projects, SPV, bank loans etc.
The investment objective is capital appreciation and trading on the stock exchange, aimed at development of bond market in the country.
Speaking on the occasion, IIFCL Chairman and Managing Director S K Goel said the IDF will complement commercial banks in providing the required long term funding for infrastructure sector and help in addressing their asset liability mismatch problems.
Goel further said that IIFCL is targeting an initial corpus of USD 1 billion by attracting both domestic and international investors.
The regulations for IDF, through mutual fund and NBFC route, were issued by the financial regulators, SEBI and RBI, following the announcement made by the Government in 2011-12.