Government seeks long-term funds to boost infrastructure work

Mumbai: India’s infrastructure financing needs are rising even as the pool of long-term liabilities in the financial system is shrinking, creating a potential mismatch for projects that require funding over decades. More than 90% of bank deposits and debt now have maturities of less than three years, compared with 60-65% earlier.

During a panel discussion at the NaBFID Infrastructure Conclave, ICICI Prudential Life Insurance managing director and CEO Anup Bagchi said the financial sector needs to build a larger pool of long-term liabilities to support infrastructure assets.

“Today almost 90% plus of the deposits and debt are less than three years now. It used to be 60- 65%. So clearly it is shortening. If you don’t generate liabilities for the long run, how do you generate demand for these assets?” Bagchi said. He said insurance and pension products could help create longer-term liabilities and suggested tax advantages for insurance policies with tenures of 10 years or more to encourage long-term savings. “And when we look at liabilities for the long term, then we should also see that there is any tax advantage between asset classes,” he said.


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The scale of infrastructure investment required in India would be substantially higher than current government spending, said Dinesh Pant managing director, LIC. “We really need to relook into the type of instruments that are available, the ecosystem of governance,” Pant said.

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He also flagged the need to balance infrastructure funding requirements with the interests of policyholders.

The industry needs to create a governance structure, which ensures that these desired outcomes are balanced between the borrowers or the investment requirements for the sector plus people who are going to invest, he said.