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Banks, financial institutions (FIs), and newly established National Bank for Financing Infrastructure Development should play a proactive role in financing projects under the National Infrastructure Pipeline (NIP) to avoid crowding out of private investment, Vivek Joshi, secretary at the Department of Financial Services (DFS), said on Thursday.
“There is a need for a proactive and strategic approach to be adopted by the banks, FIs, and Development Finance Institutions (DFIs). It is only then that the crowding out of investments can be avoided and projects of national importance will be able to access timely and reasonable financing,” Joshi said at the foundation day event of IIFCL.
On December 31, 2020, Finance Minister Nirmala Sitharaman had unveiled the NIP report setting out a capital expenditure plan of Rs 111 trillion for the next five years.
NIP has expanded to over 9,000 projects covering 34 infrastructure sub sectors. The transport sector has the highest number of projects (4,659), followed by water and sanitation (1,481), social infrastructure (1294), and energy (727).
Joshi said it was important for public institutions operating in the space of financing, to offer a mix of equity and debt products without impacting each other’s efforts to expand business.
“Meeting financing needs of new infrastructures with products which are in sync with project realities is the need of the hour. Institutional capacity to serve projects across current and emerging sub-sectors should be constantly evaluated,” he said.
Padmanabhan Raja Jaishankar, managing director at India Infrastructure Finance Company (IIFCL), said there needs to be complementarity between institutions, such as NIIF (National Investment and Infrastructure Fund) with an objective to finance equity side, whereas IIFCL is mainly debt financier to usher infrastructure financing.
“Infrastructure projects are long term and generational in nature. A holistic solution is to enforce the contractual obligations and protect the interest of all parties in the infrastructure sector,” he said.
Jaishankar made a case for having a dedicated infrastructure law. “Many developed nations have such laws and perhaps it’s the time that India also thinks about that, this will help make infrastructure projects more bankable,” he said.
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