Infrastructure financing: Narendra Modi government mulls merger of IIFCL, REC, IFCI, PFC

Just like in the banking sector, the government is looking at consolidation in the infrastructure financing space. The government is exploring the possibilities of consolidation by merging companies like India Infrastructure Finance Company (IIFCL), Power Finance Corporation (PFC), IFCI and Rural Electrification Corporation (REC) to create one or two large public-sector entities with adequate financial muscle to lend more for various infrastructure projects, and that, too, for a longer period, a senior government official told FE. The idea is at an early stage of discussions and a formal proposal on this issue is yet to be floated, said the official. Also, the viability of such mergers (which entity will be merged with whom, etc) will have to be explored in detail, he added. The move seems prompted by the fact that public sector banks, saddled with huge toxic assets, are incapable of lending much to cater to the huge fund requirements of long-gestation infrastructure projects. With the government stepping up focus on infrastructure through various initiatives like smart cities and highway and shipping projects, funding the required investments remains a huge challenge. This is especially true when banks are struggling to resolve stressed assets worth Rs 9.64 lakh crore (both gross non-performing assets and restructured standard advances, as of December 2016).

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