ICICI Bank to set up infrastructure equity fund

ICICI Bank to set up infrastructure equity fund

New Delhi: The country’s largest private sector lender ICICI Bank on Monday said that its private equity arm will set up an infrastructure fund.

The bank also called for measures to enable higher infrastructure financing by banks.

“The ICICI Venture Capital Fund would set up an infrastructure equity fund," ICICI Bank CEO and managing director Chanda Kochhar told reporters on the sidelines of a conference on state highways.

In the last 10 years, infrastructural lending by banks has gone up from $2 billion to $67 billion and, in the 12th Five Year Plan (2012-17), the debt requirements could be as high as $500 billion, she said.

Kochhar said that ICICI Bank has provided funds amounting to Rs12,000 crore for state highway projects since its inception 55 years ago. Of this, Rs5,000 crore was its own money and the rest was secured through syndication with other banks, she added.

Calling out for measures that would enable higher infrastructure funding by banks, she said that India’s road network — which carries 80% of its passenger traffic and 65% of its freight traffic — is of national importance.

“In my view, there are two important things that need to be done to increase financing for infrastructure ... enable the banks to fund infrastructure more and widen the scope of financiers that can come in to fund infrastructure," she said.

Kochhar said that bankers should be permitted to issue tax-free infrastructure bonds as infrastructure financing is a long-term affair.

“Tax free infrastructure bonds will be a very cost-effective source for the banks to actually provide long-term cost-effective financing to infrastructure projects," she added.

If the Statutory Liquidity Ratio (SLR) and the Cash Reserve Ratio (CRR) requirements on these bonds are reduced, the cost of funding for infrastructure projects can be brought down, Kochhar said.

“Priority sector classification for infrastructure funding can also go a long way in making a lot of funds available to these projects," she noted.

State highways and district roads, which constitute 18% of the road network and carry 40% of traffic, need to be urgently developed, Kochhar added.

“We do recognise as bankers that there is a critical need to expand the state roads network ... we are committed to financing the growth of state highways," she said.

Asking states to create viable and bankable projects with realistic estimates of project costs, she said that 80% to 90% of the land acquisition should be completed before signing the agreement to avoid delays and cost overruns.