Govt nod for infra debt fund norms

The IDF, which was proposed by Finance Minister in Budget 2011-12, is aimed at accelerating and enhancing flow of long term debt for funding infrastructure development in the country.  “An IDF may be set up either as a trust or company... A trust based IDF (Mutual Fund) would be regulated by SEBI; an IDF set up as a company (NBFC) would be regulated by RBI,” the Finance Ministry said in a statement. Pointing out that IDF is a novel attempt to address the issue of sourcing of long term debt, it said the structure of the fund would be reviewed for efficacy and refinement. 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. Elaborating on the structure of IDF as a company, the release said it could be set up by NBFCs or banks, with a minimum capital of Rs 150 crore. Such a fund would be allowed to raise resources through rupee or dollar bonds of minimum five year maturity and they can  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.

The trust-based IDFs 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 them would be Rs one crore.

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