According to reports, the Union Government is planning to set up a dedicated fund of Rs 10,000 crore for financing infrastructure projects in the country. This will be a boost to the country´s infrastructure sector, requiring investments of more than $1.5 trillion in the coming ten years.
The fund - through ´unconditional and irrevocable partial credit guarantee´ - will help enhance the credit rating of bonds issued by infrastructure firms so that they, in turn, can attract long-term investments especially from global insurance, pension and sovereign wealth funds.
Prior to the setting up of the dedicated fund, the Reserve Bank of India is expected to bring out a comprehensive regulatory framework for credit enhancement to infrastructure projects and Non-Banking Finance Companies (NBFC) keen on the business. The central bank´s norms for credit enhancement products will include capital requirement and bad loans or asset classification.
The dedicated fund will be in the form of a Special Purpose Vehicle (SPV) and will be categorised an NBFC-Infrastructure Finance Company. The development follows the announcement in the Budget 2016-17 on the proposed measures to deepen the corporate bond market.