FinMin, regulators meet today on infra debt fund

The finance ministry will meet regulators tomorrow to decide the structure for the proposed Infrastructure Debt Fund to finance the core sector to sustain high economic growth.

The government is expected to come out with guidelines on the Fund by June-end and broad indications say it may take the form of a company, as well as a Trust.

Economic Affairs Secretary R Gopalan is scheduled to meet all stakeholders, including the Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority (Irda) to work on the guidelines.

The meeting will discuss the capital adequacy ratio for companies to be helped and the exposure limits. Issues involving regulators, potential debt seekers, pension funds and credit rating may also come up in the meeting, said a finance ministry official.

The ministry had an internal meeting today to discuss the contours of the Fund. The view is that instead of owned funds, it should be pooled funds. Since both companies and trusts may be allowed in this space, they would issue bonds and units accordingly. Sebi will regulate companies and RBI will regulate trusts.

“We will prepare the structure for both and leave it to the promoters to decide. So, both bonds and units could be issued,” the official said.

In the Budget for 2011-12, finance minister Pranab Mukherjee had announced setting up the funds through special purpose vehicles for attracting foreign investment in the infrastructure sector. “To attract foreign funds for financing of infrastructure, I propose to create special vehicles in the form of notified infrastructure debt funds,” he had said in his Budget speech in February.

The plan is to invest $1 trillion in ports, highways, power utilities and telecom infrastructure in the next five years. A comprehensive policy framework for a public-private partnership in building of physical infrastructure and social sectors such as health and education is also on the anvil. It will lay down guidelines for the entry of private players and implementation of infrastructure projects.