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Credit enhancement fund of 500 crore to be unveiled
Why in the news ?
- Government is set to unveil Rs. 500 crore credit enhancement fund next month to facilitate infrastructure investments by insurance and pension funds.
More on news
- The fund was first announced in the Budget for fiscal year 2016-17.
- The fund is supposed to provide credit enhancement for infrastructure projects which will help in upgrading credit ratings of bonds issued by infrastructure companies and facilitate investment from investors like pension and insurance funds .
- The initial corpus of the fund, to be sponsored by IIFCL (India Infrastructure Finance Company), will be Rs 500 crore, and it will operate as a non-banking finance company.
- IIFCL will hold a 22.5% stake in the NBFC, while the Asian Infrastructure Investment Bank (AIIB) has offered to pick up a 10%.
- There is a “mismatch” at present, where bonds floated by infrastructure finance firms are typically rated BBB, whereas regulatory agencies mandate a rating of at least ‘AA’ for investments by the long-term pension and insurance funds.
Source
The Hindu