State-owned India Infrastructure Finance Company (IIFCL) says it is in a position to take over infrastrucure loans made by the country's banks, according to a report in the Economic Times of India.
The newspaper says that bank funding long-term projects with short-term money run the risk of having “serious mismatches” on their books and need a third party to take over such loans.
SS Kohli, chairman of the Indian infrastructure company, said the agency was able to step in and get involved in “take-out financing”, in which a new party takes over the obligations of existing lenders for a project by providing permanent financing.
“We have deployable funds in the region of Rs 10,000 crore and a part of this has been raised for 10-25 years,” he told the newspaper.
The report also said that take-out financing may work for power projects because most banks have reached or are close to reaching their exposure limits. A bank can give loans up to 25 percent of its net worth to infrastructure companies. With four mega power projects approved by the government, banks will need some “headroom” to finance them.
As well as take-out funding, the Indian infra arm is able to refinance 60 percent of commercial bank loans for public-private partnerhip projects over the next 15-18 months.