New Delhi: The Reserve Bank of India (RBI) has granted an in-principle approval to the country's largest private sector lender ICICI Bank for establishing the country's first infrastructure debt fund (IDF), media reports said Friday, citing sources.
The infrastructure debt fund will cater to India's growing infrastructure sector, which is in need of investments worth $1 trillion in the 12th Five Year Plan period, beginning April 1, 2012. Out of the total amount, around 50% is likely to come from the private sector.
Also, as per the norms stipulated by the banking regulator, ICICI Bank will have to set up a non-banking finance company (NBFC) to float the infrastructure development fund, the media reports added.
Earlier Friday, India's Planning Commission Deputy Chairman Montek Singh Ahluwalia had said that he expects at least one infrastructure development fund to be operational in the next financial year 2012-13, while adding that funds for the infrastructure sector will not be a constraint.
"I dont believe that finance is a constraint. There are some proposals to set up infrastructure debt funds in the country. We expect that one of the fund would be operational in the coming financial year (2012-13)," he said at an ASSOCHAM event.
In November 2011, the RBI had issued guidelines allowing banks and non-banking finance companies to launch infrastructure debt fund (IDF) to support India's long term finance in infrastructure.
As per the RBI's guidelines, IDFs can be set up either as mutual funds (MFs) or NBFCs. The IDFs established as a trust or MF would be regulated by capital markets regulator Securities and Exchange Board of India (SEBI), while a fund in the form of an NBFC will be regulated by the RBI.
Earlier, in February, Finance Minister Pranab Mukherjee in his budget speech for 2011-12 had also announced establishing IDFs to accelerate and enhance the flow of long term debt in infrastructure projects.
In December 2011, India Infrastructure Finance Company Ltd (IIFCL) in partnership with IDBI Bank, Life Insurance Corporation of India (LIC), HSBC and Asian Development Bank, had also announced that it will launch $1 billion debt fund by February 2012.
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