Public sector firms join hands for infrastructure financing
September 17th, 2011 - 11:05 pm ICT by IANS
Mumbai, Sep 17 (IANS) Government-run financial institutions — Life Insurance Corporation, India Infrastructure Finance Company Ltd and Infrastructure Development Finance Company — Saturday signed an agreement aimed at removing bottlenecks in infrastructure financing.
The three financial institutions will provide take-out financing for infrastructure projects in the country. These institutions signed a memorandum of understanding (MoU) in the presence of Finance Minister Pranab Mukherjee here.
Mukherjee said this mechanism will help financing infrastructure projects to the tune of Rs.30,000 crore.
“This will facilitate banks to take more exposure in new projects, which in turn will help in bridging the gap in infrastructure financing to a great extent,” he said.
Take-out finance is essentially a mechanism designed to enable banks/lenders to avoid asset liability mismatch that may arise out of extending long tenure loans to infrastructure projects.
Under this arrangement, banks that extend credit facility to infrastructure projects enter into an arrangement with a financial institution for transferring the loan outstanding in the bank’s books to the books of the financial institution who take out the loan.
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