IIFCL scheme to improve credit flow to infra cos

India Infrastructure Finance Co (IIFCL), in association with Asian Development Bank, on Thursday launched the Credit Enhancement Scheme, which is aimed at giving the infrastructure sector a boost and making finance easily available to this sector.

“Building of quality infrastructure is a major priority for sustaining high growth, creating a globally competitive economy and ensuring inclusive development of the country,” said finance minister Pranab Mukherjee, who was present on the occasion.

Infrastructure companies usually find it difficult to raise funds by issuing bonds because of low credit ratings. With credit enhancement scheme in place, the lenders become more open to lending money to infrastructure projects.     

“Once we step in, the asset-liability mismatch can be adjusted and banks will have more headroom. This will create more space with the banks,” said S K Goel, chairman and managing director of IIFCL.

This scheme will enable infrastructure companies to take loans for other infra projects, said Goel.

Currently, there is a mismatch in the availability and requirement of long-term funding.

As per preliminary estimates, there may be a gap of 30% in debt financing the 12th Plan (2012-17), at around $300 billion, the finance minister pointed out. “We recognise that debt of longer maturity is constrained by the absence of a developed corporate bond market and the asset-liability mismatch for most financial institutions.”

On this occasion, the heads of major public sectors banks and financial institutions signed a memorandum of understanding with a view to facilitate speeding up of financial closure of viable infrastructure projects. Among the lenders were State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank, Union Bank, IDBI Bank, LIC, IIFCL and HUDCO.