Given the huge financing requirement of the infrastructure sector, IIFCL needs to assume direct credit risk. Further IIFCL could explore leveraging their capital and budgetary allocation for raising tax free bonds to provide credit enhancements, risk mitigants, back stop liquidity and take out financing thereby attracting more private funding (including bank funding) for infrastructure.
As infrastructure projects are of huge size and are very often executed by few large groups, bank funding is necessarily limited because of exposure limit requirements. A suggestion sometimes made is to relax exposure limits – especially the group limit – where the projects are executed by an entity through an SPV and cash flows emanating from the project are separately escrowed.