New Delhi: The department of financial services, under the minstry of finance, is working on a “takeout financing” scheme through which India Infrastructure Finance Co. Ltd, or IIFCL, will help banks fund public works projects, according to senior finance ministry officials.
Details of the scheme, announced by finance minister Pranab Mukherjee in the Budget on Monday, will be released by the end of the month, said the officials, who didn’t want to be identified.
Under takeout financing, lenders funding long-term infrastructure projects with short- and medium-term loans will have an arrangement with IIFCL for transferring their outstanding loans to the latter at a pre-determined price. Such a scheme will help the lenders avoid asset-liability mismatches.
IIFCL, a special purpose vehicle for providing long-term financial assistance to infrastructure projects, may also be allowed to invest in infrastructure sectors other than roads and ports, in which it currently has exposure.
“The finance ministry is actively considering a proposal to allow IIFCL to invest in other key infrastructure sectors such as power. The sector urgently needs capacity expansion and upcoming UMPPs could also benefit from this move,” said a senior finance ministry official.
UMPP is short for ultra-mega power projects, or projects with a capacity of 4,000MW and above.
The takeout financing scheme is also expected to lay down repricing norms for IIFCL to take over infrastructure loans from commercial banks midstream.