Government of India
Ministry of Finance:

Department of: Economic Affairs
RAJYA SABHA
UNSTARRED QUESTION NO 196

TO BE ANSWERED ON 19.07.2016
Development of Long Term Debt Markets for Financing Infra Projects

196. Shri Rajeev Chandrasekhar 

Will the Minister of FINANCE be pleased to state:-

a) whether Government has taken any measures to help develop long term debt markets with a view to finance infrastructure projects, if so, details thereof;

b) whether the Life Insurance Corporation (LIC) has initiated the process to set up a credit enhancement fund to provide guarantees for infrastructure sector companies to help them access funds from domestic and overseas markets at lower cost as announced by Government in the Budget of 2016; and

c) if so, details thereof and by when would such a fund be made operational?

Answer
MINISTER OF STATE FOR FINANCE
(SHRI ARJUN RAM MEGHWAL)

a) Government has taken various steps to develop long term debt markets which includes launching of innovative financial vehicles such as Infrastructure Debt Funds (IDFs), National Infrastructure Investment Fund (NIIF), laying down a framework for municipal bonds, issuance of Tax Free Bonds, allowing complete pass through of income tax to securitization trusts including trusts of Asset Reconstruction Companies (ARCs), bringing in 5/25 Scheme to extend long tenor loans to infrastructure projects, take-out finance, flexible structuring and refinancing of project loans, higher credit exposure limits for single and group borrowers, and single NBFC/NBFC-Asset Financing Company and Infrastructure Financing Company in case excess exposure is to infrastructure sectors, amendment in investment norms of insurance companies, Employees’ Provident Funds, etc. In addition, in order to ease the way for banks to raise long term resources to finance their long term loans to infrastructure as well as affordable housing, the RBI has exempted banks from certain regulatory pre-emptions on issue of long term bonds with a minimum maturity of seven years to finance their incremental lending to infrastructure and affordable segments.

b) & c) Necessary Regulatory approvals have been sought by LIC for the setting up of a Credit Enhancement Fund to provide guarantees for infrastructure sector companies to help them access funds. The timelines for the operationalization of the Fund will be finalized after the requisite approval is in place.