The government has proposed to widen the scope of India Infrastructure Finance Co Ltd (IIFCL), the core sector financing SPV, to include all banks instead of confining assistance to the six lending agencies which are part of the inter-institutional group (IIG).

A Cabinet note, forwarded by the finance ministry, has proposed that IIFCL will depend on the project appraisal undertaken by leading banks, instead of the IIG, which consists of Infrastructure Development Finance Company, State Bank of India, Life Insurance Corporation, IDBI Ltd, Punjab National Bank and Bank of Baroda. The CCEA will take up the Cabinet note shortly.

The move is aimed to make the functioning of the SPV more open-ended, keeping in mind the active interest of private and foreign banks in core sector financing.

The finance ministry has also agreed to reduce the guarantee fee for IIFCL’s borrowings from the usual 1 per cent to 0.25 per cent. The move is aimed at reducing the cost of funds.

The government has decided to grant flexibility to the SPV - to be registered as a non-banking finance company under the Companies Act, 1956 - in choosing a mix of borrowings.  As per the proposal, IIFCL can lend directly to public sector projects and to those taken up through the public-private partnership route.

Also See:

SPV for infrastructure projects likely to start by November 2005 (6-Oct-05)

Union Budget: 2005-06 (01-Mar-05)