FinMin to act on Parekh report in steps

In order to expedite the implementation of the Parekh Committee's recommendations on infrastructure financing, the finance ministry has decided to pursue a few key issues instead of taking up the whole report.

"Instead of discussing the whole report with stakeholders, which is time-consuming, we are identifying a few recommendations that need to be pursued on a priority basis," said a finance ministry official.

The Parekh Committee has recommended the creation of a robust market for making available long-term debt instruments for infrastructure.

It has also advocated tapping the potential of the insurance sector and rationalising the participation of banks and NBFCs (non-banking finance companies) in infrastructure financing.

It has also suggested facilitating equity flows and use of foreign exchange reserves for the sector.

The finance ministry held a meeting to discuss the report on July 11. The meeting, attended by senior officials of the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Reserve Bank of India, could discuss only two chapters of the report.

Meanwhile, the finance ministry has written to the law ministry to clarify if the RBI could invest in a financial institution. There is a difference of opinion between the finance ministry and the RBI on the use of forex for infrastructure.

The RBI has agreed to provide $5 billion reserves per annum through the refinancing route whereas the finance ministry wants the RBI to take a stake through direct investment in the overseas subsidiary of India Infrastructure Finance Company Ltd.

However, the RBI has been insisting that the RBI Act does not allow it to invest in any financial institution.