The take-out financing scheme introduced by Union finance minister Pranab Mukherjee in this year’s Budget is likely to be finalised within a month. The scheme aims at offering relief to financial institutions funding long-term infrastructure projects from asset-liability mismatch scenario. This is expected to encourage funding in the core sector.
As a part of the move, the Budget empowered India Infrastructure Finance Co Ltd (IIFCL) to enter into take-out financing deals with banks funding the projects. IIFCL has readied the scheme.“We have prepared the scheme and submitted it to the government. The scheme is likely to come in shape within a month,” a top IIFCL official told DNA Money.
Without divulging details on the tenets of the scheme, the official said, “We have
had meetings with the bankers and other stakeholders and tried to evolve a scheme that should provide comfort to both IIFCL as well as the bankers.”
Take-out financing is a tool used by lenders to free-up the balance sheet of the loan by transferring it to another institution. Thus, a bank wanting to be relieved of an existing loan will be able to ‘take-out’ its loan and transfer it to IIFCL.Though an accepted tool globally, earlier experiments with take-out financing have not been successful.
Almost a decade back, Infrastructure Development Finance Corp (IDFC) tapped this window of core sector financing but was unable to garner the desired result.
IIFCL, accepting the fact that take-out financing is a challenge, is girding up for the task.
“It is going to be challenging in two aspects. First ofall, past experience is not
so satisfactory. Secondly,we need to raise resourcesto take care of this commitment. We are looking at external commercial borrowings, domestic resources, bond as well as loans,” said the official.The lender is bullish on disbursals.
“Our disbursal by the end of this financial year will reach 4,500 crore,” the official said. Disbursals during April-October 2009 stood at Rs 1,900 crore, compared with Rs 1,200 crore in the corresponding period last year.
In the last three years, IIFCL has financed 125 projects worth Rs 1.75 lakh crore.
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