The Finance Minister, Mr Pranab Mukherjee, will launch on Thursday the much- awaited credit enhancement scheme of the state-owned India Infrastructure Finance Company Ltd (IIFCL).
Besides the launch of the credit enhancement scheme, Mr Mukherjee will also preside over the memorandum of understanding (MOU) signing by IIFCL with seven major public sector banks, LIC and HUDCO for direct financing of infrastructure projects.
The seven major state-owned banks are State Bank of India, Bank of Baroda, Bank of India, Canara Bank, Union Bank, IDBI Bank and Punjab National Bank.
The main objective of this MoU is to facilitate project developers and ensure that they need not run from bank to bank for financial closure of their projects, according to Mr S.K.Goel, Chairman and Managing Director of IIFCL.
There will now be an uniform approach to project financing and a proposal coming to one bank will be discussed with others who are part of the MOU, he said.
“It is a sort of consortium. The projects will be considered jointly," Mr Goel said when asked if it was a consortium approach to financing of infrastructure projects.
Meanwhile, the launch of the credit enhancement scheme is likely to pave the way for development of infrastructure debt market in the country.
On this occasion, Mr Mukherjee is expected to hand over IIFCL’s partial guarantee letter to the GMR Group for a road project developed by GMR J Expressways, a special purpose vehicle of the GMR Group, at Jadcharla in Andhra Pradesh.
For this first pilot, IIFCL will provide partial guarantee to the tune of 15 per cent of the bonds to be issued by the project developer.
This would help enhance the credit rating of GMR J Expressways to ‘AA' from ‘A', thereby helping the SPV to raise funds from insurance and pension funds besides other investors.