Industrial Development Bank of India and Life Insurance Corporation of India have forged an alliance to fund about Rs 35,000 crore (Rs 350 billion) worth of long gestation projects, including infrastructure.
IDBI has already syndicated Rs 15,000 crore (Rs 150 billion) of loans for long-term projects and has projects requiring funding of about Rs 35,000 crore in the pipeline.
LIC will provide take-out financing for the exposures taken by IDBI, which does not have the ability to longer term exposures given its shorter-term resources profile, IDBI chairman V P Shetty said.
The investment requirement for infrastructure projects in the 11 the plan (2007-20012) is estimated at Rs 1,57,000 crore ($350 billion).
The projects covered under alliance will be appraised singly or jointly. IDBI will first make a reference to the public sector life insurer to share the financing of projects and only later approach other banks and institutions for syndication.
LIC is required to invest 50 per cent of its premium income in infrastructure. LIC will have Rs 85,000 crore (Rs 850 billion) of investible surplus in 2006-07.
LIC had invested Rs 13,832 crore (Rs 138.32 billion) in infrastructure projects as on March 31, 2006. It further invested Rs 6,034 crore (Rs 60.34 billion) in infrastructure projects in the current year up to November 2006.
According to Shetty, also chairman of Indian Banks' Association, faced with a wide gap in deposit mobilisation and credit growth, banks would be forced to change their lending strategy and rebalance exposures to certain sectors.
Non-food credit continues to grow at over 30 per cent for the third year in row, while deposits are growing at about 20 per cent.
The chief finance officers of banks are expected to meet finance ministry officials next week to explore ways of ensuring flow of greater savings to banks, including tax benefits on interest earnings.
