The Industrial Development Bank of India (IDBI) is planning a strategic alliance with Film Finances Inc for its film financing foray.
If the deal works out, IDBI will not bear the risk in financing films as the international agency gives guarantees of completion to the financier. The arrangement is in line with the global practice in film financing.
As a necessary precondition to finance a project, IDBI also wants the producers to take a comprehensive insurance cover.
Film Finances, founded in 1950, proposes to open an office in India shortly. It has its presence in the US, UK, Canada, Italy, France and Copenhagen, besides a representative office in Australia. With offices around the world the company monitors pictures round the clock.
"We are looking at film financing as a risk-free investment. The international agency will take the responsibility for the completion of the film and will also do the project appraisal in the run-up to the sanctioning of funds," said IDBI executive director R S Agarwal.
Film Finances requests for the script, the shooting schedule and the budget that has been approved by the financiers. It then takes a decision as to whether it will take responsibility for securing guarantee of completion of the film.
The Reserve Bank of India (RBI) last week came out with a set of guidelines on film financing for banks. The central bank is allowed to pump in up to 40 per cent of the project cost of a film.
But the RBI has barred banks from finaning mega projects worth over Rs 10 crore. The IDBI wants to enter film financing in a big way. The institution is ready to take exposure in any project costing between Rs 2 crore and Rs 25 crore.
Film Finances provides financiers assurance that films would be delivered on time and that the over budget costs would not be the financier's responsibility. "Any film takes at least one to two years. The pre-shooting expenses are borne by the entrepreneur, but once we disburse the funds, we need to cover the risks. Completion bonds will ensure this," said Agarwal.
All motion pictures guaranteed by Film Finances are insured through the London insurance market.
