The Credit Enhancement Fund, announced by Finance Minister Arun Jaitley last Budget, is expected to be operational by the end of this fiscal, a senior Finance Ministry official said.
The IIFCL-anchored fund will help raise credit rating of bonds floated by infrastructure companies and facilitate investments from long-term investors.
“To ease flow of institutional credit to infrastructure projects, what the government has been thinking in this regard is credit enhancement. IIFCL is playing a lead role in that proposed institution,” Kumar V Pratap, Joint Secretary (Infrastructure Policy and Finance) in the Finance Ministry said.
“We had a meeting yesterday with RBI and the credit rating agencies. So, we hope to launch this fund within this financial year. Mechanics are being worked out,” he said at an event organised by India Infrastructure Finance Company Ltd (IIFCL) on the occasion of its 12th foundation day.
Raising the credit rating of these companies would help easier access to institutional financing, he said.
Jaitley in 2016-17 Budget speech had proposed that LIC will set up a dedicated fund to provide credit enhancement to infrastructure projects.
However, LIC could not anchor the proposed company because of regulatory issues.
Some public sector banks, including SBI and Bank of Baroda, have evinced interest in picking up stake in the fund.
Public sector LIC, General Insurance Corporation of India (GIC Re) also plans to pick up stake in the credit enhancement fund.
IIFCL Deputy Managing Director Sanjeev Kaushik said the RBI has agreed to most of the suggestions and the final guidelines on Credit Enhancement Fund should come out soon.