West Bengal Infrastructure Development Finance Corporation (WBIDFC) is looking to act as the treasurer to the state government, more particularity an arm for short term investment of Central grants.
The move can vest substantial power to WBIDFC, which has been reduced to a minor lending institution after the state has stopped borrowing funds through it.
Recently, Planning Commission granted an annual plan outlay of Rs 25,910 crore a for 2012-13 financial year, 16 per cent more than that of the previous year allocation of Rs 22,214 crore.
“There is a suggestion if WBIDFC can manage funds such as grants from Central government. These are huge funds, and can be investment in short term instrument, which is highly liquid,” said Abhirup Sarkar, chairman, WBIDFC.
Apart from fixed deposits in banks there were not many options for short term investment of funds, he added.
WBIDFC, is a non-banking financial Company (NBFC), registered with the Reserve Bank of India RBI, was established in the year 1997 by the government of West Bengal to provide funds for the infrastructure facilities in the state. Over the last few years, the company was reduced as a vehicle for raising bonds for deficit financing on behalf of the state government. The bonds, which carried unconditional and irrevocable guarantee of the government of West Bengal, were backed by WBDIFC recurring deposits and term deposits in banks in such a way that the maturity value of such deposits equals the principal value of the outstanding bonds at the time of redemption. The West Bengal government used to provide for the deposits through its revenue receipts on the first day of every month.
Dismantling the mechanism, the new government has decided not to borrow funds through WBDIFC, and instead it is relying on cheaper loans like the state development loan (SDL).
Thus, WBIDFC, is now preparing a restructuring plan to keep itself afloat. As a part the exercise, the institution is keen to diversify into newer areas of infrastructure lending , apart from taking up the job of managing short term funds for the state government.
“We are looking at newer areas of infrastructure lending like loans for hotels, education institutions and hospitals. However, we will be cautious in new lending and will be averse for any proposal with high risk,” said Sarkar.
The state has been replacing high cost debt with low cost borrowing by borrowing through SDL. Till February, the state repaid about Rs 1,100 crore in loans from t WBIDFC. Most were borrowed at more than 10 per cent interest.