IDFs fail to grow despite regulatory reform: ICRA

The refinancing of the infrastructure projects through dedicated finance companies — infrastructure debt funds (IDFs) — has failed to grow in a big way in the last two years, despite regulatory reforms. Limited number of operational projects with one-year track record and reluctance of banks to provide low-risk infra loans are holding back growth of IDFs, according to rating agency ICRA.

IDFs are investment vehicles for channelising investment to the sector, sponsored by the commercial banks and non-banking financial companies (NBFCs) in India for facilitating the flow of long-term debt to the sector. An IDF can be set up either as a trust (infrastructure debt fund – mutual funds) or as a NBFC. Currently, there are three IDF-NBFC’s operating in India — India Infra Debt Limited, IDFC Infrastructure Finance Limited and L&T Infra Debt Fund. Rohit Inamdar, group head, ICRA, said there has been changes in the regulatory landscape yet the limited number of operational projects with track record of satisfactory performance for at least one year in the sector has impacted the lending activity of IDFs.