The government is set to unveil a ₹500-crore credit enhancement fund next month to facilitate infrastructure investments by insurance and pension funds, a senior Finance Ministry official said.
The fund was first announced in the Budget for fiscal year 2016-17.
“India is launching a dedicated fund, may be next month, to provide credit enhancement for infrastructure projects which will help in upgrading credit ratings of bonds issued by infrastructure companies and facilitate investment from investors like pension and insurance funds,” said Kumar Vinay Pratap, Joint Secretary (Infrastructure, Policy and Finance), Ministry of Finance. The initial corpus of the fund, to be sponsored by IIFCL (India Infrastructure Finance Company), will be ₹500 crore, and it will operate as a non-banking finance company, he said.
Bond rating
Mr. Pratap said there is a “mismatch” at present, where bonds floated by infrastructure finance firms are typically rated BBB, whereas regulatory agencies mandate a rating of at least ‘AA’ for investments by the long-term pension and insurance funds.
IIFCL will hold a 22.5% stake in the NBFC, while the Asian Infrastructure Investment Bank (AIIB) has offered to pick up a 10%, Mr. Pratap said, adding that SBI, Bank of Baroda and LIC will also have stakes in the firm.
