FinMin to seek Cabinet nod for credit guarantee fund

The Finance Ministry will soon move a Cabinet note seeking approval to set up the Credit Guarantee Enhancement Corporation Fund in partnership with government bodies including LIC, IIFCL, PFC and REC as well other companies soon for enhancing sources of capital for infrastructure financing.

"The Credit Guarantee Enhancement Corporation Fund is being set up as a Non-Banking Financial Company (NBFC) with partnership of IIFCL, LIC, PFC, REC and similar other companies. A CCEA note in this regard is under process", official sources said adding inter-ministerial consultations are over.

Department of Economic Affairs will move the note for CCEA (Cabinet Committee on Economic Affairs). The existing infra financing government-anchored agency is National Investment and Infrastructure Fund (NIIF) , India's first sovereign wealth fund that was set up in February 2015.

NIIF is a fund manager that seeks to create long-term value for domestic and international investors seeking to invest in energy, transportation, urban infrastructure and other infrastructure-related sectors in India.

The Credit Guarantee Enhancement Corporation Fund was Budget announcement of the current fiscal. The regulations have been notified by the RBI, was announced to be set up in 2019-20. When set up, it may have an authorised capital of Rs 20,000 crore and will provide guarantee to bonds issued by completed projects. The fund would be set up to increase sources of capital for infrastructure financing.

To support the funding of infrastructure pipeline over the next five years that would require Rs 103 lakh crore, the government has provided about Rs 22,000 crore as equity support to two government-owned infrastructure financing agencies, which will help them mobilise Rs 1 lakh crore. In the Budget 20202-21, Finance Minister Nirmala Sitharaman announced, that "This would cater for equity support to Infrastructure Finance Companies such as India Infrastructure Finance Company Ltd (IIFCL) and a subsidiary of National Investment and Infrastructure Fund (NIIF). They would leverage it, as permissible, to create financing pipeline of more than Rs 1 lakh crore. This would create a major source of long-term debt for infrastructure projects and fulfill a long-awaited requirement."

India Infrastructure Finance Company Ltd (IIFCL) is a wholly-owned government company to provide long term finance to viable infrastructure projects through the Scheme for Financing Viable Infrastructure Projects. IIFCL has been registered as a NBFC-ND-IFC with RBI since September 2013. In December last year , Cabinet had approved infusing additional Rs 5,300 crore capital into IIFCL through recapitalisation bonds in the current fiscal year.

Roads, railways, gas grids and power generation remain on top of the government agenda for infrastructure.