Allow IFCs to buy projects turning into NPAs: Assocham

Government should allow infrastructure finance companies to buy projects that turn into non-performing assets, industry body Assocham said today.
"....Has suggested the government for allowing infrastructure finance companies (IFCs) to purchase infrastructure projects turning into non-performing assets (NPAs) and retain them as standard assets to bring the infra sector back on growth trajectory and relieve banking industry from a stressed portfolio," Assocham said in a release.
In a note to Finance Minister Arun Jaitley, Assocham has said that as NPAs grow at an alarming rate, NBFCs and IFCs should be allowed to take over stressed assets from banks like asset reconstruction companies do by issuing security receipts.

"The need of the hour is to create an enabling environment to promote growth of IFCs as they can alleviate funding problem into infrastructure sector," Assocham Secretary General D S Rawat said.
Government should actively consider putting in place separate norms for NPA classification for infrastructure and non-infrastructure loans, it said.
IFCs should be allowed to issue tax-free bonds to help them mobilise long-term financing and use the funds for infrastructure development, it said.

Assocham has also recommended allowing IFCs to raise external commercial borrowings under automatic route without cap of 75 per cent including outstanding ECBs as it would help them disburse faster to infrastructure sector.

In its letter to Jaitley, Assocham said that IFCs should be allowed to deploy a minimum of 50 per cent of their total assets in infrastructure loans instead of present requirement of minimum 75 per cent.
"By allowing 50 per cent deployment in non-core assets, IFCs will also enjoy flexibility in terms of managing its day-to-day operations.