Finance Minister P. Chidambaram has urged banks to recognise the complementary role played by the Infrastructure Debt Funds (IDFs) and not be averse to sell their loan exposure in an infrastructure project when an IDF steps in. “When an IDF steps in, the bank must be willing to release the loan. Banks must recognise that sooner their money is released, they will be able to lend to more projects,” Chidambaram said.
An IDF steps in after the project is completed and starts operating. It takes over the loan portfolio from banks by paying them a small premium on their exposure. However, bankers are of the view that when it is time to reap rewards from a project, there is no reason why should they hand over the loan to a third party such as an IDF.
IDF provides long term finance through the lifecycle of the project, the Finance Minister said. “I appeal to banks to recognise the importance of the new instrument (IDF) that we are introducing and acknowledge the complementary role of the banks and the IDF,” he said.
The Finance Minister also said that without making the country’s infrastructure world class, it cannot be competitive.
“Our roads, railways and ports must become world class. I hope that the idea of IDF will help in making Indian infrastructure world class,” he said while launching the IDF of IL&FS. The Finance Minister said that foreign investors are interested to invest in IDFs in the country. “If they (foreign investors) must invest in India, we must get our act together. Approvals must be granted quickly, projects must be completed on time without cost over runs. When the project commences, the concessionaire of the project must run the project efficiently,” he said.
The anticipated investment in infrastructure in the twelfth plan period (2012-17) is $1 trillion. “We have to find half of this in the public sector and half of it in the private sector. If we break it up year wise it is easily fundable by mobilising resources within the country and abroad,” he said.