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IDFs are specialised investment vehicles channelling long-term domestic and international funds for financing projects. IDFs can be set up as NBFCs or mutual funds, allowing investors to pool their funds in a diversified portfolio of infrastructure projects.
The new rules for IDFs say that there is no need for a sponsor for IDFs anymore. Also IDFs can now directly lend money to Toll Operate Transfer projects (ToT). IDFs can access external commercial borrowings (ECBs). A three-party agreement is now optional for Public-Private Partnership (PPP) projects.
“IDFs can play a role in deleveraging banks by taking out long-term infra loans from them,” said Rajkiran Rai, MD National Bank for Financing Infrastructure and Development (NaBFID). He added that banks have asset-liability mismatches in long-term lending.
“There is a need for different classes of investors in the infrastructure segment, who have long-term capital, to ensure that there is spreading of risk and reward,” Rai said.
IDFs were created in 2011 and permitted to operate as non-banking finance companies and mutual funds. However, they had not taken off in a big way as they found it difficult to compete with banks and other non-bank lenders. Bankers said that the new norms were aimed at levelling the playing field among different lender categories.
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