State-owned India Infrastructure Finance Company (IIFCL) has asked the government to remove a limit on the ability of IIFCL (UK), the UK subsidiary of IIFCL, to finance Indian infrastructure projects, according to a news report.
According to the present rule, total lending by IIFCL (UK) to any Indian project company should not exceed 20 percent of the total project cost, as stated on the IIFCL website. The state-owned infrastructure company has asked the finance ministry and the Planning Commission of India to increase the limit from 20 percent to 50 percent.
IIFCL chairman and managing director SK Goel told Financial Express that the 20 percent cap is a hindrance for the company to compete globally.
“No company that borrows abroad wants to raise only 20 percent from IIFCL (UK) and remaining 80 percent from other banks,” Goel said.
An official from IIFCL (UK) declined to comment on the said proposal.
Currently, the UK arm of IIFCL borrows funds from the Reserve Bank of India (RBI), which is then lent to Indian companies implementing infrastructure projects in India, or to co-finance their external commercial borrowings (ECB) for such projects, solely for capital expenditure outside India, as stated on the website.
IIFCL (UK) was set up in 2008 with a view to supplement financial resources for infrastructure development in India. It lends to private companies to buy equipment overseas that will be installed for infrastructure creation such as power plants or metro rail in India.