The Finance Ministry will soon finalise the Cabinet note to put in place the Infrastructure Debt Fund (IDF) with a view to accelerating flow of long-term funds for infrastructure projects.
"IDF note will go before Cabinet shortly and we will announce it after it is approved," Finance Minister P Chidambaram said.
The IDF, which was proposed in the Union Budget for 2011-12 fiscal, is aimed at accelerating and enhancing flow of long term debt for funding the ambitious programme of infrastructure development in the country.
The requirement of infrastructure fund in the 12th Plan (2012-17) has been pegged at $1 trillion.
The IDF will help in meeting the funding requirement of infrastructure sector wherein banks are constrained by their exposure limit to a company or a project.
According to sources the IDF would be based on a tripartite agreement between developer, lender (bank) and the IDF. The loans by the banks would be refinanced by the IDF so that banks have free funds for more lending.
An IDF may be set up either as a trust or company... A trust based IDF (Mutual Fund) would be regulated by Sebi, while an IDF set up as a company (NBFC) would be regulated by the RBI.
The fund would try to garner resources from domestic and off-shore institutional investors, especially insurance and pension funds. Banks and financial institutions would be allowed to sponsor IDFs.
A NBFCs with a minimum capital of Rs 150 crore can set up an IDF. Such a fund would be allowed to raise resources through rupee or dollar denominated bonds of minimum five-year maturity. These bonds could be traded among the domestic and foreign investors.
Company based IDFs would be allowed to fund projects in public-private partnership (PPP) which have completed one year of commercial operations.
As regards the trust-based IDFs, the fund could be sponsored by a regulated financial sector domestic entity. It would have to invest 90 per cent of its assets in the debt securities of infrastructure companies or SPVs across all infrastructure sectors.
Minimum investment by trust-based IDF would be Rs 1 crore with Rs 10 lakh as minimum size of the unit.