The Reserve Bank of India (RBI) will now regulate India Infrastructure Finance Company Ltd (IIFCL). The Union Cabinet on Thursday approved a proposal in this regard.

Announcing the decision, the Information and Broadcasting Minister, Ms Ambika Soni, said, “IIFCL will be brought under the regulatory oversight of RBI by registering it as an non-banking finance company — Infrastructure Finance Company ( NBFC-IFC).”

The decision will increase the authorised capital of IIFCL to Rs 5,000 crore from Rs 2,000 crore, with a proviso that it may be further increased to Rs 8,000 crore with the approval of the Finance Minister, she added.

IIFCL, which started operating from April 2006, provides long-term debt for infrastructure projects. After reviewing its performance, the Economic Advisory Council to the Prime Minister had advised that it should be placed under the regulatory oversight of the RBI as a financial institution, such as Nabard, SIDBI, Exim Bank or National Housing Bank.

According to a Government statement, bringing IIFCL under the regulatory oversight of RBI with clearly defined prudential norms would be financially prudent and would safeguard the long-term sustainability of the institution. The increase in authorised capital would enable IIFCL to expand its financial assistance to the infrastructure sector and meet the needs of increased capital adequacy ratio, it added.

Shishir.s@thehindu.co.in

(This article was published on October 13, 2011)
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