Direct Idfc Lending To Core Sector Ruled Out

Non-executive chairman of Infrastructure Development Finance Company Deepak Parekh said the finance company would not engage in any direct lending to the infrastructure projects.

Talking to the news agency in the sidelines of the two-day conference organised by the state government here yesterday, Parekh said the new finance company would primarily be a major capital market intermediary for infrastructure projects.

Financial institutions (FIs) provide term-finance for only five years for infrastructure projects. IDFCs role would be in assisting these FIs in providing long-term finance to the infrastructure projects. Parekh said the company would give more details about its functioning after its business plan is ready. Apart form the non-executive chairman there are no full-fledged staffers as yet. He said.

 

According to Parekh, IDFCs key role would be in developing an efficient debt market in the country. The company would also go for back-stop financing to mitigate construction risks, he added. Earlier, speaking at a session on infrastructure, Parekh said IDFC would need to provide credit enhancement for bonds issued by infrastructure companies to make them eligible for placement for specialised financial institutions and other agencies.

The IDFC would also focus on some of the key issues relating to creation of a long-term rupee market in the country for the infrastructure projects, he said.

Parekh said it would be apposite to consider the formulation of specific packages, encompassing equity and debt for the identified projects which could be formulated on a bilateral basis for funding project preparation expenses.

Drawing attention to various incentives given to the infrastructure projects, Parekh said a section under the Income Tax Act would permit special purpose vehicles to be incorporated for domiciling infrastructure projects, which could be tax free up to 12 years.