The Union Government is planning to set up a dedicated fund of Rs 10,000 crore for financing infrastructure projects in the country. 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. RBI’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. The public sector insurers, leading state-owned banks and multilateral lending agencies are being made part of the large fund.