State-owned infrastructure lender India Infrastructure Finance Company (IIFCL) today inked a pact to buy loans worth Rs 1,500 crore from Union Bank of India (UBI) so that the state-run bank can utilise the funds for other projects in the crucial sector.
This is the first-ever major agreement on "takeout" financing in the country, a procedure under which loans made by banks to infrastructure firms are sold to other institutions so that the banks recover their much-needed funds ahead of the payment schedule under the loan agreement.
This is done to address the asset-liability mismatch, because loans are made to infrastructure projects on a long- term basis, whereas deposits of banks are generally of a short or medium tenor.
"We today issued the sanction letters for the first takeout finance transaction to UBI involving taking out of over Rs 1,500 crore in seven different projects from power and road sectors," IIFCL CMD S K Goel told reporters after the meeting.
This fiscal, IIFCL will do takeout financing of around Rs 3,000 crore, Goel said. The company will do takeout financing of Rs 25,000 crore over a period of three years, he added.
"Out of Rs 25,000 crore takeout financing, we can expect Rs 100 crore of profit," he said.
Goel said memorandums of understanding have also been signed with Allahabad Bank, Indian Bank, PNB and UCO Bank for takeout financing.
"According to this scheme, we will be taking out extra exposure of the banks, so that they can continue to lend to infrastructure. They should not be compelled to stop lending because of asset-liability mismatch," he said.
Besides takeout financing, IIFCL will sanction Rs 32,000 crore worth of loans to the infrastructure sector and disburse Rs 15,000 crore this fiscal, out of which Rs 11,800 crore has already been given.
Last year, IIFCL had disbursed Rs 7,000 crore worth of loans.
