IFVs :A new financial institution from govt.

H : T Ramakrishnan : 6 Nov 2014

It will provide fillip to the implementation of infrastructure projects

: Aimed at providing a fillip to the implementation of infrastructure projects, the government has decided to establish a fourth-generation financial institution and create three infrastructure finance vehicles (IFVs), including a mutual fund.

The Tamil Nadu Infrastructure Fund Management Company (TNIFMC), approved at a meeting of the Tamil Nadu Infrastructure Development Board in September, will be set up in partnership with banks, insurance companies and reputable private financial institutions. Funds, to be raised from potential investors in India and abroad, will be used to lend to or invest in public projects, public-private partnership (PPP) and private projects.

Need for such a financing mechanism was felt after the government decided to implement infrastructure projects to the tune of Rs. 15 lakh crore under the ambit of the Tamil Nadu Vision 2023. Recent regulatory changes also enable new and innovative IFVs, says an order issued by Chief Secretary Mohan Verghese Chunkath about a week ago.

Earlier, the Tamil Nadu Industrial Investment Corporation (TIIC) was set up in 1949 under the Companies Act, the Tamil Nadu Transport Development Finance Corporation in 1975 [registered as a non-banking finance company with Reserve Bank of India] and the Tamil Nadu Urban Infrastructure Financial Services Limited in 1996 as a PPP entity.

To augment the resource base for infrastructure projects, the IFVs – infrastructure debt fund (IDF), alternative investment fund (AIF) (category-I) and infrastructure investment trust (InvIT) - would be formed, the order said.

While the IDF would be like any other debt mutual fund with the TNIFMC functioning as the asset management company, the AIF would be a privately-pooled investment vehicle, collecting funds from investors.

InvIT, the concept of which was announced in the last Union budget, was meant for attracting long-term finance from foreign and domestic sources, including NRIs. The TNIFMC would be the fund manager for both the AIF and InvIT.

 It would run with a highly credible and independent Board of Directors, the order added.