 "IDFC seeks clarity from RBI on infra bond norms")
Infrastructure Development & Finance Company (IDFC) has sought the Reserve Bank of India (RBI)'s clarifications on the new infrastructure lending norms.
Sunil Kakar, group chief financial officer, said going company is likely to issue long-term infrastructure bonds that are exempt from cash reserve ratio (CRR) and statutory liquidity ratio (SLR) rules, depending on the clarification from RBI.
Kakar said the company is trying to seek clarity on how the rules will be applicable to them, as they are in the process of becoming a bank.
Earlier this month, RBI had incentivised banks to raise long-term bonds by relaxing the norms. The central bank had said funds raised via long-term bonds (tenor of more than seven years) will be exempt from cash and statutory reserve requirements, if the proceeds were used to fund new long-term infrastructure projects and affordable housing. Also, the loans funded via this process will be exempt from the computation of adjusted net bank credit for the purpose of calculating priority sector lending requirements.
Infrastructure loans being the main focus for IDFC, these new guidelines are expected to be advantageous for the company.
"This will be positive for us," said Vikram Limaye, managing director and chief executive officer of IDFC.
Limaye added the new bank will be operational by 2015 and IDFC will demerge a part of its business towards the new bank by December this year. Over 90 per cent of the total assets is expected to be transferred towards the bank.
Rajiv Lall who is the executive chairman of IDFC, will be the vice-chairman and MD of the new bank.
IDFC has reported a 14 per cent drop in net profit to Rs 482 crore in the financial year's first quarter, ended June, compared with Rs 557 crore during the same period last year. Kakar said the company is now focusing on moving from an incurred loss to an expected loss model of business and is also being cautious on its loan book growth.
Sunil Kakar, group chief financial officer, said going company is likely to issue long-term infrastructure bonds that are exempt from cash reserve ratio (CRR) and statutory liquidity ratio (SLR) rules, depending on the clarification from RBI.
Kakar said the company is trying to seek clarity on how the rules will be applicable to them, as they are in the process of becoming a bank.
More From This Section
"We have sought clarifications on what will be the baseline for us in the case of incremental infrastructure lending, which in the case of the banks is July 15. But we are not a bank, so where do we draw the line? Even if we assume it is July 15, or could it be on the date of transfers, so those clarifications are being sought. Based on these clarifications, we can recalibrate our loan book growth," he added.
Earlier this month, RBI had incentivised banks to raise long-term bonds by relaxing the norms. The central bank had said funds raised via long-term bonds (tenor of more than seven years) will be exempt from cash and statutory reserve requirements, if the proceeds were used to fund new long-term infrastructure projects and affordable housing. Also, the loans funded via this process will be exempt from the computation of adjusted net bank credit for the purpose of calculating priority sector lending requirements.
Infrastructure loans being the main focus for IDFC, these new guidelines are expected to be advantageous for the company.
"This will be positive for us," said Vikram Limaye, managing director and chief executive officer of IDFC.
Limaye added the new bank will be operational by 2015 and IDFC will demerge a part of its business towards the new bank by December this year. Over 90 per cent of the total assets is expected to be transferred towards the bank.
Rajiv Lall who is the executive chairman of IDFC, will be the vice-chairman and MD of the new bank.
IDFC has reported a 14 per cent drop in net profit to Rs 482 crore in the financial year's first quarter, ended June, compared with Rs 557 crore during the same period last year. Kakar said the company is now focusing on moving from an incurred loss to an expected loss model of business and is also being cautious on its loan book growth.