IDFC may be nodal agency for core sector fund

Banks funding projects through fund to provide loans at 2% below PLRs

Infrastructure Development Finance Company (IDFC) is likely to be the nodal agency for the Rs 50,000 crore infrastructure and manufacturing fund announced by Finance Minister Jaswant Singh earlier this year. The finance ministry is pushing for operationalising the fund from April 1.

Officials told Business Standard the State Bank of India, Industrial Development Bank of India, Life Insurance Corporation, ICICI Bank, Bank of Baroda and Punjab National Bank would be the initial agencies involved with the fund.

These agencies would not be required to chip in with any contribution to start with, a banker said. The funding would be based on the proposals submitted by companies and banks would take an exposure depending on their individual appetites, he added.

Banks, which will finance projects through the fund, will be required to provide loans at 2 per cent below their prime lending rates.

The Centre will make good the 2 per cent interest subsidy or fund the viability gap in its bid to provide a fillip to investments in the core sector.

Apart from the infrastructure and manufacturing fund, Singh had announced the establishment of a Rs 50,000 crore agri-infrastructure fund and a Rs 10,000 crore fund for small and medium enterprises (SMEs).

While the National Bank for Agricultural and Rural Development (Nabard) will be the implementing agency for the agri-infrastructure fund, the Small Industries Development Bank of India (Sidbi) has been appointed the nodal agency for the Rs 10,000 crore fund for SMEs.

The confusion over the future structure of IDFC had delayed the finalisation of the infrastructure and manufacturing fund.

With the government deciding to buy the Reserve Bank of India's 15 per cent stake in the company, the finance ministry has decided to assign IDFC the task of being the nodal agency.

The secretariat would be on the lines of the corporate debt restructuring cell in IDBI to oversee the restructuring of companies, a finance ministry official said.

IDBI Executive Director JN Godbole, who heads the CDR cell, is the co-ordinator for all proposals where 75 per cent of the lenders are willing to restructure the liabilities of a company to help it recover from going to the Board for Industrial and Financial Reconstruction or the Debt Recovery Tribunal. The cell is also responsible for policy changes that may be required to help revive ailing companies.

Core issues

• Other participants are SBI, IDBI, LIC, ICICI Bank, BoB and PNB
• The funding will be based on the proposals submitted by companies, banks would take an exposure according to individual appetites
• Exposure by participants will be based on individual appetite
• The fund will be operationalised from April 1