LIC Looking To Hold More Than 20% Stake In Credit Enhancement Fund
The insurer’s board has approved the proposal to hold 20 percent in the fund.
- India Infrastructure Finance Company Ltd. to hold 20 percent stake in the fund
- State Bank of India and Bank of Baroda to hold 10 percent each
State-owned Life Insurance Corporation of India's board has given its in-principle approval to acquire 20 percent stake in the credit enhancement fund, and may hike its stake further if the government and the insurance regulator approve the proposal, three officials with direct knowledge of the matter told BloombergQuint.
As per current deliberations, the government's wholly owned subsidiary, India Infrastructure Finance Company Ltd. which will also be spearheading the fund, at least at the initial stages, will also hold 20 percent in the fund.
The credit enhancement fund is being set up to help raise the credit rating of bonds floated by infrastructure companies and to make it easier for investors to invest in such bonds. The proposal was part of the Union Budget 2016 which proposed that LIC will set up a dedicated fund to provide credit enhancement to infrastructure projects. An email query to LIC did not elicit a response.
Other stakeholders include State Bank of India and Bank of Baroda which are likely to own 10 percent stake each in the fund, two officials quoted above said.
An SBI spokesperson told BloombergQuint over the phone that the bank is awaiting the Reserve Bank of India's guidelines to finalise the quantum of investment made in the fund.
Emailed queries and calls made to Bank of Baroda did not elicit a response.
Two other government-owned companies – Power Finance Corporation Ltd. and Rural Electrification Corporation Ltd. – are likely to pick up 5 percent each in the partial credit enhancement fund. The two companies could not be reached for comments.
The government has invited multilateral organisations like Asian Development Bank and International Finance Corporation – an arm of the World Bank – to invest in the fund.
The finance ministry's Department of Economic Affairs is in talks with the RBI for setting up rules to govern this new entity, which is likely to be registered as a non-banking finance company-infrastructure finance company (IFC-NBFC).
IIFCL will incorporate the company under the Companies Act, and will be mostly registered as IFC-NBFC with some special guidelines from RBI, the second official quoted above said.