Infrastructure debt funds (IDFs) get powers to recover debt

The government today modified norms for Infrastructure Debt Funds (IDFs) by giving them powers to recover debt, in line with those provided to banks. The Cabinet Committee on Economic Affairs (CCEA) has removed "certain impediments" in operationalisation of IDFs, according to an official statement.

Now, such funds will have "access to the benefits of  Public Financial Institutions (PFI) status to IDFs like permitting IDF NBFCs to file Shelf Prospectus...and access to provisions of the SARFAESI Act, including to the adjudicatory process through Debt Recovery Tribunals as currently permitted to Banks and PFIs."

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"In addition, post-successful COD (commercial operation declaration) PPP projects will now be eligible for investment by insurance companies, provident funds, EPFO and mutual funds, among others," the release said.

The government envisages Rs 56.3 lakh crore (about USD 1 trillion) investment in the infrastructure sector during the 12th Five Year Plan period. IDFs are expected to channelise long term funds from insurance and pension funds, sovereign wealth funds to supplement lending for infrastructure projects by banks which are increasingly being constrained by their asset-liability mismatch and exposure limits.
   
The cost and tariff of infrastructure services are likely to go down as a result of low cost, long term debt provided by IDFs, the release said.  In addition, the taking over of existing bank debts by IDFs will release an equivalent volume for fresh lending by banks to infrastructure projects, it added.

"This will also help in overcoming the issue of asset-liability mismatch being faced by banks," it said. The CCEA also approved the capping of the annual guarantee fee payable to the concession authority at 0.05 per cent a year of outstanding debt financed by the IDF NBFC (Non Banking Financial Companies) for the first three years of operation of the IDF NBFC.

With an aim to deal with the issue of asset-liability mismatch being faced by banks, the framework for the IDFs was announced and in October 2012, the Cabinet Committee on Infrastructure (CCI) approved the adoption of a Model Tripartite Agreement (MTA) for the Highways Sector.

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