The scheme will mainly undertake investment in debt securities of infra cos

With an eye on the long-term horizon of insurance and pension funds, Finance Minister P. Chidambaram, on Tuesday, maintained that infrastructure debt funds (IDFs) should try to mobilise resources from these sectors.

Speaking after launching the maiden $1 billion IDF scheme of IIFCL Mutual Fund here, Mr. Chidambaram said: “For infrastructure debt funds, we should try to mobilise resources from insurance and pension sectors as these funds are available for long-term horizon.”

Mr. Chidambaram pointed out that infrastructure development and expansion of financial products such as IDFs and takeout finance were crucial for achieving a growth rate of eight per cent. “…in order to give thrust to investment in the 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 to fill the financial gap in the infrastructure sector,” he said.

The Finance Minister later handed over ‘in-principle sanction 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 projects are in the operational phase.

For launching the maiden IDF, 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 — HUDCO and its parent company IIFCL. While Canara Bank and HUDCO are the strategic investors of the IDF, Corporation Bank, Oriental Bank of Commerce and IIFCL are the other investors. The fund is aimed at catalysing investments by way of securitised debt instruments of infrastructure projects.

According to an official statement here, the IDF scheme will mainly undertake investment in debt securities or securitised debt instruments of infrastructure companies, infrastructure capital companies or infrastructure projects, SPV (special purpose vehicle).

IIFCL CMD S. K. Goel said the IDF would complement commercial banks in providing the required long-term funding for the infrastructure sector.