Cabinet considering more capital infusion in IIFCL, Exim Bank. The Reserve Bank of India may be allowed to invest up to $4.3 billion in bonds floated by the World Bank.

The Reserve Bank of India may be allowed to invest up to $4.3 billion in bonds floated by the World Bank.

The Cabinet is expected to consider a proposal in this regard on Thursday. It may also take up a proposal to infuse additional capital in two key financial institutions, IIFCL and Exim Bank.

World Bank Bond

“Since there is virtually no headroom for World Bank to loan to India, there is a plan for private placement of bonds with the RBI.

“In turn, this will help India to raise long-term finance,” a senior Finance Ministry official told newspersons here. Subsequently, the RBI will earn interest on its investment, like in the case of US bonds.

Meanwhile, another senior government official said, “The Union Cabinet may also consider infusing Rs 400 crore in IIFCL and Rs 700 crore in Exim Bank.” IIFCL (India Infrastructure Finance Company Ltd) provides long-term finance to viable infrastructure projects, while Exim Bank has been set up to give financial assistance to exporters and importers.

The capital infusion, once approved, will take IIFCL’s paid-up capital to Rs 3,300 crore. This is being done to supplement available long-term finance for commissioning a viable infrastructure fund.

This will also help the institution raise long-term funds from the domestic and overseas markets at lower cost.

“This will boost long-term lending to infrastructure projects,” the official added.

IIFCL, on a consolidated basis, is targeting fresh disbursements of around Rs 15,800 crore in 2013-14 which would take the cumulative disbursements on a consolidated basis to around Rs 46,200 crore.

When approved, Exim Bank’s capital will be a little over Rs 3,750 crore.

“This will help the bank to go for more borrowings. This will also help in supporting Indian exporters to secure large overseas projects through lending,” the official added.

(This article was published on September 11, 2013)
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