LIC to invest Rs 1.5 lakh crore in rail infrastructure

Railways today signed an MoU with Life Insurance Corporation for raising Rs 1.5 lakh crore for financing its capacity augmentation projects.

It's a very interesting event where marriage is taking place between two organisations of India -- Railways and LIC -- and both are going to be benefitted from this, Railway Minister Suresh Prabhu said at the MoU signing event.

Under the MoU, state-run insurance major LIC will commit Rs 1,50,000 crore to Railways for developing infrastructure and the investment would be made over a period of five years.

The investment would be done in bonds issued by various railway entities such as Indian Railways Finance Corporation (IRFC), beginning next fiscal. There would be a five year moratorium in interest and loan repayment.

Describing it as a "win-win situation for both", Prabhu said, "It is a significant step in raising Rs 1.50 lakh crore. People are always asking where is the money? So there is money with honey because this is coming in a such a rate which is good for LIC and good for us."

With the fund, the cash-strapped Railways will be able to augment its resources for speedier execution of projects.

Also present at the event, Finance Minister Arun Jaitley highlighted the need for improvement in performance of Railways.

"Railways have a long history. But the growth of railway has to be expanded. Railways have to run professionally. Railway journey for passenger has to be a matter of comfort and delight. It can't be a matter of compulsion with no option. Therefore, the quality of Railways has to hugely improve," Jaitley said.

Jaitley termed LIC's decision to fund rail projects as a "commercial decision", saying "LIC is also a great commercial giant and it is an example of how state institutions can grow so huge, grow professionally, and serve the country.