New financing tool to boost infra funding

The government is likely to clear a new financing tool, which would help infrastructure project developers access funds at a cheaper rate based on a guarantee and also free funds for banks to lend to industry and retail borrowers. In the beginning, this product would provide funding support of around Rs 15,000 crore. The proposal, which will be considered by the Finance Ministry, envisages a guarantee by government promoted Indian Infrastructure Finance Company (IIFCL) which will subscribe to 25-50 per cent of the bonds being issued by the infrastructure company. This will be bac­ked by an insurance cover by the Asian Development Bank (ADB) to the tune of 50 per cent of IIFCL's exposure.