RBI okays $5-bn forex reserves for infrastructure

NEW DELHI: The Reserve Bank has given an in-principle nod to invest $5 billion of foreign exchange reserves annually in infrastructure projects through two subsidiaries of India Infrastructure Finance Company (IIFCL).

However, certain issues still remain and the government is in talks with RBI to address them, the finance ministry said in a note for the Economic Editors Conference that began here on Monday. “The RBI board has given in-principle approval in respect of the SPV to be established to borrow funds from the RBI and lend to Indian companies implementing infrastructure projects in India, or to co-finance their external commercial borrowings for such projects solely for expenditure outside India,” the note said. Experts believe that India’s forex reserves should be utilised to finance infrastructure projects.

According to Plan panel estimates, the country needs investments worth $492 billion till 2012 for infrastructure development. The RBI board has emphasised that the overall framework needs to be consistent with legal requirements and must exhibit fiscal prudence and consistency with global best practices.

On the basis of Deepak Parekh committee’s recommendations, finance minister P Chidambaram had proposed in Budget 2007-08 that two wholly-owned overseas arms of IIFCL be allowed to borrow funds from RBI and lend to Indian companies implementing infrastructure projects in India, or to co-finance their ECBs for such projects solely for capital expenditure outside India.