New NBFC to ease credit for infra projects on cards

livemint.com:

₹8-9 trillion are being made in infrastructure every year. A finance ministry spokesperson didn’t respond to emailed queries. Experts said infrastructure projects would benefit significantly from a dedicated credit enhancement body as it would ensure investments required over the medium to long term are realized.

Sanjay Agarwal, senior director, Care Ratings Ltd, said that an NBFC providing guarantees to improve the credit risk profile of infrastructure companies will help infrastructure projects initiated by states and even at district levels, which have funding challenges due to various reasons including operational and political. “Infrastructure projects like renewables and roads are well-financed. However, some projects by state governments, especially last mile schemes, need financing," he added.

The plan to set up such an NBFC to augment capital availability for infrastructure financing was first announced by finance minister Nirmala Sitharaman in the 2019-20 budget. However, its launch has been delayed due to disagreements among different government departments during extended inter-ministerial consultations, said the second person mentioned above. An earlier plan included setting up a Credit Guarantee Enhancement Corp.

or National Infrastructure Credit Enhancement Ltd with an initial authorized capital of ₹20,000 crore and equity participation from other state-run financial institutions. The government has finalized an infrastructure pipeline with a projected investment of ₹111 trillion for FY20-25. Moreover, now a Vision 2047 plan has been finalized that would create a fresh pipeline of infrastructure projects, which makes a credit guarantee enhancement NBFC relevant.