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Under Construction: India’s Infrastructure Debt Funds—Their Importance, Challenges, and Opportunities

Publication | September 2014
Under Construction: India’s Infrastructure Debt Funds—Their Importance, Challenges, and Opportunities

Infrastructure is a binding constraint on India’s development for various reasons. Although infrastructure debt funds (IDFs) will not resolve these constraints, they will help with the lack of long-term financing.

In February 2011, India’s Minister of Finance announced in the Union Budget a new investment vehicle to fund the infrastructure sector—infrastructure debt funds. Later that year, the Reserve Bank of India and the Securities and Exchange Board of India promulgated IDF regulations. In 2012 and into 2013, a flurry of financial institutions applied and received approvals to establish IDFs. Yet, despite all of this activity, IDFs are yet to achieve their potential.

The paper begins with a brief overview of IDFs and then makes three central arguments:

  • India needs IDFs as it addresses one of the key limiting factors to infrastructure development;
  • there are two fundamental challenges inhibiting IDFs’ emergence; and
  • these challenges create an opportunity for ADB assistance.

Contents 

  • Abstract
  • Overview of Infrastructure Debt Funds
  • The Need for Infrastructure Debt Funds
  • Infrastructure Debt Funds Challenges
  • Opportunities for ADB Assistance
  • Under Construction