What is the new bank that the government is creating to fund infrastructure projects?

The government is back to its task of boosting infrastructure. It is just that, this time it is a lot more aggressive and is also taking a big bet. In order to boost infrastructure segment in India, the government is planning to create a special infrastructure bank with $13.7 billion equity capital to fund roads, ports and other key infrastructure projects.

The existing India Infrastructure Finance Company which has a rupee corpus of Rs.2000 crore will be merged into the new bank, once it is created and capitalized. The government will initially fund the capital but will subsequently also invite investors to contribute. That is somewhat like the NIIF had invited the Canadian Pension Fund.

We need to remember that this year the budget will be a kind of a tightrope walk for the finance minister with the revenues falling short by a huge margin. The government has already committed big Infrastructure investments as they are the key to economic revival. A facilitating bank and the backing of robust debt markets with breadth and depth are normally two pre-requisites for a robust infrastructure funding program.