A memorandum of understanding (MoU) was signed between IIFCL, LIC and IDFC on Saturday in the presence of Union Finance Minister Pranab Mukherjee here to provide Takeout Finance for infrastructure projects.
“There was felt need for higher take out. The MoU between IIFCL and LIC and IDFC will provide for takeout up to 50 per cent of the total project cost in the ratio of 20:20:10 by these institutions respectively. I expect this mechanism will help financing to the tune of Rs.30,000 crore under the scheme. This will facilitate banks to take more exposure in new projects, which in turn will help in bridging the gap in infrastructure financing to a great extent,” said Mr. Mukherjee on the occasion. Takeout Finance Scheme was launched on October 12, 2010, when an MoU between IIFCL and PNB, Allahabad Bank, Union Bank, Indian Bank and UCO Bank was signed. This scheme is aimed at removing the bottlenecks in infrastructure financing by addressing asset liability mismatch (ALM) and group exposure issues. In this scheme, IIFCL can take out debt up to 20 per cent of the total project cost after the COD of the project with certain limitations.
Earlier during the day, Mr. Mukherjee had asked the Chief Ministers of West Zone States to speed up approval for infrastructure projects, which have been held up due to regulatory issues. Continuing his economic exercise of direct interaction with States, the Finance Minister held a review meeting of West Zone States in Mumbai on Saturday on wide ranging issues pertaining to credit offtake and flow of funds to the farm sector.
“I have recently got some feedback from public sector banks that over 140 big projects have been held up due to regulatory approvals. Delay in implementation of projects, particularly infrastructure and manufacturing projects, deprive the economy of their benefits. It also affects downstream investments and resultant employment generation” Mr. Mukherjee said. He requested the Chief Ministers to pay personal attention to review the approval of large projects.
The Finance Minister said the Centre had fixed the target for agricultural credit flow at Rs4,75,000 crore, of which Rs.1,12,731 crore had already been extended. He asked the States to create awareness about the 4 per cent short-term crop loans being extended to farmers, who repay their loans on time. “It must be ensured that no eligible farmer is left out” he said.
Underlining that ‘Swabhimaan' was an ambitious plan for financial inclusion launched by the Central Government, Mr. Mukherjee said 73,000 habitations were set to be covered by banking services. In the Western Zone, 15,547 habitations were to be covered of which 5,940 (or 38 per cent) have been covered by March 2011. He urged the State governments and banks to speed up the process to cover the remaining 9,607 habitations by March 2012.
Mr. Mukherjee expressed concern over low credit deposit ratio in Madhya Pradesh, Chhattisgarh, Goa and Dadra & Nagar Haveli and asked the respective State leaders to utilise State Level Bankers' Committee to boost credit-deposit ratio. He sought cooperation of all State governments in popularising e-payment. He said, since most PSU banks have now moved to core banking, the States should introduce mandatory e-payment for its various transactions, such as payments to its employees and contractors.
Maharashtra, Gujarat, Rajasthan, Madhya Pradesh, Chhattisgarh, Goa and the Union Territories of Daman & Diu and Dadra & Nagar Haveli were represented in Saturday's meeting. CMDs of public sector banks and financial institutions such as NABARD, SIDBI, National Housing Bank and IIFCL were also present.
