New Delhi: State-run India Infrastructure Finance Company Ltd is expected to get $250 million from the Reserve Bank by month end, as part of government’s plans to invest $5 billion of forex reserves for infrastructure development.
“As a first tranche of $5 billion forex funds, we will be borrowing $250 million from the Reserve Bank that would be used to lend to Indian companies to import infrastructure equipment. We are awaiting government clearnance on guaranteee on bonds, which is expected to come by month end,” said S S Kohli, CMD, IIFCL.
Kohli said the government would initially give a guarantee for $250 million bonds, with a tenure of 10 years, at LIBOR (London InterBank Offered Rate).
IIFCL plans to borrow up to $5 billion forex reserves from RBI to invest or lend to Indian companies engaged in infrastructure sector, he said.
Notably, IIFCL recently set up an investment vehicle in London to fund infrastructure projects at home, which has received the UK regulatory approval. The company is likely to start its business activities once the government gives its guarantee on funds.
Under the government plans to use a part of forex reserves for the infrastructure sector, the London-based subsidiary will get funds from RBI.
With forex reserves surging to over $290 billion, the government is looking ways to use them for infrastructure development, which is estimated to require around $492 billion over the next five years.
The offshore subsidiary is different from the $5 billion fund IIFCL announced last year in partnership with Blackstone Group and Citigroup. Kohli, former chairman of Punjab National Bank, has said that IIFCL has already raised $2 billion from Australia’s Macquarie Bank.
Earlier, the Finance Ministry had also said that IIFCL would be allowed to borrow funds from the National Small Savings Fund.
The rules governing investments of the fund has been amended to enable this and the government is now considering a loan request from IIFCL for Rs2,500 crore. IIFCL has so far approved 64 credit proposals worth Rs14,966 crore.
Meanwhile, official sources said there is little progress on another proposed subsidiary to provide credit guarantee to companies in India that want to raise funds abroad.