Govt allows IIFCL to use Rs 3,000 cr for direct lending

The government has allowed India Infrastructure Finance Company Ltd (IIFCL) to use approximately one-third of its Rs 10,000-crore refinancing facility for direct lending to infrastructure projects.

The move came after the state-run infrastructure financing company failed to find takers for the scheme. This would primarily provide more resources for public-private partnership projects in roads, power, airports and ports.

“The government has permitted us to use Rs 3,000 crore from the refinance facility for our own resources. Another Rs 1,500 crore will be given to Rural Electrification Corporation (REC) and Power Finance Corporation (PFC),” IIFCL Chief Executive Officer Pradeep Kumar told Business Standard.

In December 2009, the government had allowed IIFCL to raise Rs 10,000 crore through tax-free bonds to refinance infrastructure projects. However, the scheme got lukewarm response from banks, which were able to raise funds at lower rates. The government allowed IIFCL to access an additional Rs 30,000 crore once funds raised in 2009-10 were utilised. The amount has now been revised to Rs 25,000 crore.

IIFCL will use Rs 1,500 crore from the refinance facility by the end of the month for direct disbursements. A similar amount will be utilised for its own lending in the April-June quarter of 2010-11.

The loan to REC and PFC will leave IIFCL with a refinance corpus of Rs 5,500 crore in the new financial year. It will raise an additional Rs 6,000 crore next year to meet its disbursement target of Rs 11,000 crore.

“Our disbursements are expected to touch Rs 9,000 crore by the end of this financial year and reach around Rs 20,000 crore by March 2011. So, we will disburse Rs 11,000 crore in 2010-11. The amount will be equally divided between direct disbursements and indirect lending,” said Kumar.

For the first time, IIFCL is planning to raise $1 billion through a medium-term note programme in Singapore. The lender has already got the Reserve Bank of India’s nod for raising funds abroad.

“We will do it in two tranches of $500 million each till 2011-12. But we will go for this route only when the international cost of funds is on a par with the domestic market or lower. At the moment, the domestic market looks slightly better,” said Kumar.