IIFCL, LIC, IDFC enter into MoU for takeout financing
September, 19th 2011
India Infrastructure Finance Company (IIFCL), LIC and IDFC on Sunday entered into a tie-up for providing financing of up to Rs 30,000 crore to infrastructure projects.
"I expect this mechanism will help financing to the tune of Rs 30,000 crore under the (takeout finance) scheme," finance minister Pranab Mukherjee said in a statement on the occasion of signing of a memorandum of understanding (MoU) by the three companies.
Takeout financing is a mechanism through which banks can take care of asset liability mismatches (ALM) occurring in funding the long gestation infrastructure projects by transferring loans to the books of a third entity.
The government appointed India Infrastructure Finance Company (IIFCL) as the special agency to look after the takeout finance scheme in 2010, but it could take only 20% of a project's total cost.
Through the tripartite agreement signed by IIFCL, life insurance giant LIC and infrastructure finance company IDFC, the limit can go up to 50%, a statement issued here said.
Under the agreement, IIFCL and LIC will take 20% each of a project cost, and IDFC the remaining 10%. "This will facilitate banks to take more exposure in new projects, which in turn will help in bridging the gap in infrastructure financing to a great extent," the statement said.
According to estimates, the country will require up to $1 trillion investment in infrastructure in the 12th five-year plan period starting next year.