The state-owned infrastructure financing company IIFCL has engaged rating agency ICRA to study the merits in allowing financial institutions to guarantee bonds issued by infrastructure developers.
"We have appointed ICRA to study the proposal of credit wrap (or guarantee) insurance to fund infrastructure projects. They are expected to submit the report within the next 10 days," India Infrastructure Finance Company (IIFCL) chairman and managing director S S Kohli told PTI.
After getting the report, IIFCL plans to take the proposal to the board and then to the government for approval, he said.
"If this gets approved by the government, it would help infrastructure companies gain better access to funds," he said.
As large number of infrastructure projects are routed through special purpose vehicles and as most of these lack past data on its financials, the infrastructure companies are in a better position with guarantees to their bonds.
"Once it gets through, infrastructure builders would be able to use our (or any other financial institution's) rating for their bonds to raise funds at competitive rates," Kohli said.
One of the reasons for delays in infrastructure projects is lack of timely and competitive financing as project developers are not able to tie up for funds due to the long-gestation of such loans.
