Infrastructure Debt Funds in Incipient Stages - India Ratings


Infrastructure debt funds (IDFs) will moderate banks' over-exposure to the infrastructure sector (33.29% of overall funding at FYE14) and reduce their burden to pave way for newer investments, believes India Ratings & Research (Ind-Ra). IDFs are investment vehicles to channelise long-term and low-cost funds into infrastructure assets. The government considers IDF to be a panacea for the ailing sector and its introduction as an inflection point.IDFs can be set up both as mutual funds (MFs) and non-banking financial companies (NBFCs). Although IDFs are gradually gaining momentum in refinancing the existing loans, certain elements restrain the smooth takeover of such loans. Existing lenders prefer IDF MF while investors prefer to invest in IDF NBFC. Nevertheless, certain structural adjustments, improved investor's risk appetite and the availability of active secondary market could nurture IDF activity. 

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