IIFCL in new infrastructure lending deal with nationalised banks

India Infrastructure Finance Company Ltd (IIFCL) today signed a clutch of agreements with public sector banks, including Union Bank of India, Punjab National Bank, Indian Bank, Allahabad Bank and UCO Bank, in respect of some identified infrastructure projects as part of the first major initiative under `takeout' finance scheme.

Under the scheme, IIFCL will take out the infrastructure loan from the books of the original lender up to 100 per cent of the outstanding amount, subject to the condition that the total takeout amount does not exceed 50 per cent of the total residual loan of the infrastructure project. The takeout would occur after one year of achievement of commercial operation date (CoD). Post-takeout, depending upon the risk profile of the project, IIFCL may consider reduction in the rate of interest.

The move is aimed at bridging the huge gap in the availability of long-term resources to meet infrastructure investment requirements in the country.

The 12th Plan (2012-17) is expected to see a substantial gap of about 30 per cent in the availability of funds for financing infrastructure investment and, as per government's preliminary estimates, about $300 billion additional funds would have to be raised in debt for meeting the demand.

With debt of longer maturity not available because of the various constraints such as absence of benchmark rates for raising long term debt from the market, asset-liability mismatch of the tenor of debt in case of most financial institutions and high cost of long term debt, takeout finance is expected to provide additional funding for infrastructure projects.

Speaking at the function, finance minister Pranab Mukherjee said he expected the scheme to pick up momentum and provide additional funding for infrastructure projects in the country.