Bangalore: IIFCL (Indian Infrastructure Finance Company Ltd) has got the green signal from the Finance Minister, Pranab Mukherjee, to generate $1 billion ( 5,000 crores) for the Infrastructure Debt Fund (IDF) by April next year. It has decided to raise the required funds through mutual funds and not non-banking finance company (NBFC). IIFCL also said that India requires $1 trillion in the next 5 years to restructure the country’s infrastructure in the Twelfth Five Year Plan.

S. K. Goel, IIFCL Chairman and Managing Director, said that the company got the approval regarding the plan from the government on December 3, 2011. He said that the mutual funds route was chosen because the SEBI guidelines regarding it were more flexible and half the fund for the project will be provided by foreign companies, while the remaining half will be catered to by Indian players. He further added, “The proposed $1 billion is only the initial corpus. It would be expanded as we move along. Simply having one or two partners will not give a sizeable corpus in the long run. We have already finalized the domestic institutions — LIC (10 percent of corpus) and IDBI Bank (14 percent). We have also got tentative approval from Asian Development Bank (ADB) (25 percent) and HSBC (25 percent) who are likely to be the foreign institutions.” He added that IIFCL would provide 26 percent of the proposed amount.

IDF was proposed by Mukherjee in this year’s budget. Goel said that the recent developments in ‘takeout financing’ by the government has made infrastructure developers of projects and banks more interested in this field. Transparent and Completive Pricing have been proposed in the takeout finance scheme. Takeout financing is a process in which banks provide loans to infrastructure organizations and the loans provided will be taken out of their books by IIFCL. This also helps banks steer clear of asset-liability mismatch and it also helps in freeing up their funds to be given as loans to other companies. The current takeout interest rate is 9.90 percent-11.15 percent, which can change depending upon the ratings of the project being taken up. The government has also relaxed the tenure of takeout financing, which now stands at 15 years.