INDIA - The Indian government has said it is finalising the launch of an $11bn (€7.7bn) infrastructure debt fund and hopes to secure investments from insurance companies and pension funds.

It is seeking to attract both local and foreign institutional investors, which can provide long-term funding to finance infrastructure projects and will therefore soften taxation rules to make the vehicle more attractive for offshore funds.

The infrastructure debt fund will be set up as a trust or a company.

If the government opts for a trust, the fund will issue rupee-denominated units to investors, which will mature in five years. It will also be regulated by the Securities and Exchange Board of India.
If the fund is set up as a company, it will be managed as a non-banking financial company and issue rupee or dollar-denominated bonds. The fund would then be regulated by the Reserve Bank Of India.

The government also said banks and foreign investors would only be allowed to invest as sponsors of the infrastructure debt fund.

Until recently, only local banks were allowed to provide debt for infrastructure projects in India.

However, local financial institutions faced difficulties to lend for this type of projects, which require long-term funding.

India has currently the largest infrastructure programme among the emerging markets and plans to invest a total of $1trn over the next five years.

But a recent global ranking of transport infrastructure programmes, published by consultancy EC Harris, found that the country was only "moderately attractive".

Last month, PGGM said it was looking to expand its infrastructure portfolio in emerging markets, including India, China and Latin America.