 "Govt, RBI discuss long-term money for stunted venture fund")
The government is in talks with the Reserve Bank of India to get long-tenure money for the India Venture Opportunities Fund (IVOF), meant to fund micro, small and medium enterprises.
The fund, mooted with a $1 billion (Rs 5,500 crore) corpus by then finance minister Pranab Mukherjee in his Budget for 2012-13, has failed to take off. IVOF is managed by the Small Industries Development Bank of India (Sidbi). As reported in this newspaper earlier, bankers say the fund has received just about Rs 500 crore. Of this, Rs 340 crore has been invested. This includes Rs 140 crore investment in subordinated debt of companies.
There was a proposal to source three-year money from banks from the resources they put into the Rural Infrastructure Debt Fund. However, this is too short a period to deploy and get returns on equity investments.
A senior Sidbi official said it was very difficult to manage a corpus (equity investment) with three-year funds. It throws up the challenge of asset-liability mismatch -- an obligation to give back money to banks in three years, while the return on investments (equity) is not certain.
Longer term resources (about seven years) from banks will help in making prudent investments. "The asset-liability match can be dealt effectively for long-term funds. We have a strong balance sheet to deal with the issue," said a top Sidbi official.
A public sector bank executive said investments in risk capital (equity) by banks are treated as exposure to sensitive sectors and RBI has reservations about using depositors' money for this.
The fund, mooted with a $1 billion (Rs 5,500 crore) corpus by then finance minister Pranab Mukherjee in his Budget for 2012-13, has failed to take off. IVOF is managed by the Small Industries Development Bank of India (Sidbi). As reported in this newspaper earlier, bankers say the fund has received just about Rs 500 crore. Of this, Rs 340 crore has been invested. This includes Rs 140 crore investment in subordinated debt of companies.
There was a proposal to source three-year money from banks from the resources they put into the Rural Infrastructure Debt Fund. However, this is too short a period to deploy and get returns on equity investments.
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A finance ministry official said the government was aware of the issue and was in touch with RBI to find a way out, to provide long-term money. However, he did not give details.
A senior Sidbi official said it was very difficult to manage a corpus (equity investment) with three-year funds. It throws up the challenge of asset-liability mismatch -- an obligation to give back money to banks in three years, while the return on investments (equity) is not certain.
Longer term resources (about seven years) from banks will help in making prudent investments. "The asset-liability match can be dealt effectively for long-term funds. We have a strong balance sheet to deal with the issue," said a top Sidbi official.
A public sector bank executive said investments in risk capital (equity) by banks are treated as exposure to sensitive sectors and RBI has reservations about using depositors' money for this.