india first infrastructure debt fund
IDF infrastructure mutual funds in india infrastructure debt funds infrastructure debt fund india infrastructure meaning infrastructure debt (idfs) infrastructure funds Qualified Green Building and Sustainable Design Project Bonds guidelines rbi ,GREEN BONDS,REPO BONDS,BLACK MONEY
Infrastructure Debt Funds is a debt instrument being set up by the finance ministry in order to channelize long term funds into infrastructure projects which require long term stable capital investment.
According to the structure laid out by the finance ministry, after
consultations with stakeholders, infrastructure NBGCs, market regulators and
banks, an IDF could either be set up as a trust or as a company.
IDFs in India:
The government of India has unveiled the
structure of infrastructure debt funds (IDFs), allowing local infrastructure
developer’s access to money from insurance and pension funds from India and
overseas, even as bank lending to roads and power projects is constrained by
limits set by the central bank. IDFs are expected to provide long-term,
low-cost debt for infrastructure projects. At present, banks are the main
source of funding for these projects. Asset-liability mismatches and loan
exposure limits to industries set by the Reserve Bank of India (RBI) have made
it difficult for banks to provide long-term funding. It is here underscored
that the IDF was proposed by in Budget 2011-12. The ultimate aim of the IDFs is
to accelerate and enhance the flow of debt for funding the ambitious programme
of infrastructure development in the country. The requirement of infrastructure
in the 12th Plan has been pegged at $1 trillion. The IDF would help garner
resources from domestic and off-shore institutional investors, especially
insurance and pension funds. Banks and financial institutions would be allowed
to sponsor IDFs. In India the IDFs could be set up by NBFCs or banks, with a
minimum capital of Rs 150 crore. Such a fund would be allowed to raise
resources through rupee or dollar denominated bonds of minimum five year
maturity. These bonds could be traded among the domestic and foreign investors.
Company based IDFs would be allowed to fund projects in public-private
partnership (PPP) which have completed one year of commercial operations.
Potential investors in this category, include off-shore and domestic
institutional investors, high net worth individuals and non-resident Indians.
If the IDFs are set up as a trust, the fund could be sponsored by a regulated
financial sector domestic entity. It would have to invest 90 per cent of its
assets in the debt securities of infrastructure companies or SPVs across all
infrastructure sectors. Minimum investment by trustbased IDF would be Rs 1
crore with Rs 10 lakh as minimum size of the unit. The credit risks associated
with underlying projects will be borne by the investors and not by IDF, but in
case of company-based IDF, the fund would bear the risk.
GREEN BONDS
Green Bonds are tax-exempt bonds which are issued by
qualified organizations and/or municipalities for the development of
brown-field sites. Brownfield sites are areas of land that are under-utilized,
have abandoned buildings, or are under developed. They often contain low levels
of industrial pollution. Green Bonds are short-hand for Qualified Green
Building and Sustainable Design Project Bonds. These bonds are created to
encourage sustainability and the development of brown field sites. The
tax-exempt status makes purchasing a green bond a more attractive investment
when compared to a comparable taxable bond. Green bonds could, in fact, be all
of the following: green gilts, green retail bonds and green investment bank
bonds. But, there are many more being proposed as well, including: green
infrastructure bonds, multilateral development bank green bonds, green
corporate bonds, green sectorial bonds, rainforest bonds and index-linked carbon
bonds. Green bonds have an important role in helping to raise finance for
different parts our low-carbon transition.
RENEWABLE ENERGY CERTIFICATES (REC)
India has also allowed trading of REC; it is one of the key
growth drivers for the Renewable energy industry. As of now, the REC is traded
in 2 of the major power exchanges: - Indian Energy Exchange (IEX) and Power
Exchange India Limited (PXIL).
What is REC: World over, Renewable energy is more expensive
than traditional forms of energy and the growth of renewable energy has been
supported mostly by governments through various policy initiatives like Feedin-
Tariffs, subsidies, tax concessions, among others. In order to make the
renewable energy sector more sustainable, many countries like Australia, Japan,
etc. have put in place a mechanism to trade the renewable energy on platforms
similar to stock exchanges. The trade of the energy will be purely based on demand
and supply and the only role the government plays is to mandate utility
companies to buy a certain part of their power from renewable energy sources.
Under the REC Mechanism, when Renewable Energy is generated (solar, wind,
biomass, etc.), the energy is divided into two components – the physical
commodity electricity and a tradable certificate, which is the Renewable Energy
Certificate (REC).
CORPORATE REPO BONDS
Banks, corporate and primary dealers pledge corporate bonds
with each other to raise short term money. It is similar to banks pledging
government securities with the RBI to raise short term money. Unlike pledging
of government securities, here the borrower who pledges corporate bonds does
not receive the entire value of the bond. Allowing repo in corporate bonds
enables mutual funds, insurance firms and non-banking finance firms to borrow
money by offering corporate bonds as collateral. In India the RBI guidelines on
repo in corporate debt securities came to effect on March 1, 2010. But till date
the corporate repo bonds are not much active in India. Only five deals have
been reported so far. Companies that have issues corporate bonds in India are
REC, PFC, HDFC, and NHB. The corporate repo bonds in India has not grown much
because of lenders or issuers maintaining a cautious approach as well as due to
lack of proper trade guarantee mechanism.
Understanding Repos:
Repos, or repurchase agreements, are
contract for the sale and repurchase of securities and treasury bills at a
future date. In this transaction, the seller repurchases the financial asset at
the same price at which it was sold, and pays interest on it. Essentially, repo
is a short-term, interest-bearing loan against the collateral of securities.
PANEL ON BLACK MONEY
Facing flak from different quarters for not doing enough to
deal with the black money menace, the government recently constituted a
high-level committee of taxmen to suggest a legal framework for confiscating
such wealth by declaring it as “national assets”. The Government has been
facing a sustained onslaught for having taken little action on black money
holders within or outside the country. The chorus on the need to tackle black
money was so loud that it disrupted Parliamentary proceedings during the Winter
Session last year. The Committee headed by Central Board of Direct Taxes (CBDT)
Chairman Sudhir Chandra will submit its report in six months. The Committee has
been tasked to examine the existing legal and administrative framework to deal
with the menace of generation of black money, including, inter alia, declaring
wealth generated illegally as national asset and enacting laws to confiscate
and recover such assets. The Government had earlier also constituted a
committee comprising heads of various probe agencies and specialized
departments to monitor the investigation and initiate steps to bring back black
money stashed in tax havens. The committee headed by CBDT Chairman has also
been asked to examine ways to strengthen laws to stop illegal transfer of black
money and its recovery. It will also suggest exemplary penalties. The committee
will consult all the stakeholders and submit its report within a period of six
months.
No comments:
Post a Comment