Insurance, pension funds may get to invest in lower rated infra बोंड्स
The proposal has suggested that insurance and pension funds invest a greater proportion in AA-rated bonds of infrastructure funds. At present, insurance and pension funds are mandated to invest 15 per cent of their corpus in the infrastructure sector. Of this, 75 per cent has to be put in AAA-rated debt instruments.
“We have suggested that this sub-window should be relaxed so that 50 per cent of the funds can be invested in AA-rated bonds. This would ensure that the overall limit for infrastructure sector remains the same but more funds can go into projects with a lower credit rating,” a senior government official close to the development said.
The proposal, which...is now being discussed with insurance regulator IRDA and pension watchdog PFRDA, would enable the flow of more long term capital into core sector projects, especially those that have a lower credit rating.
The finance ministry wants pension and insurance funds to invest more heavily in infrastructure projects as it tries to meet a target of $1 trillion of investments into the sector in the Twelfth Five Year Plan period.
It had earlier suggesting permitting them to invest in BBB rated paper of infra firms as well as increase the amount they can allocate to the sector. However, the regulators were not comfortable with the idea of exposing lifetime savings of individuals to low rated bonds. World over such long term capital is considered to be apt for core sector projects, which have a gestation period of 10 to 15 years. Banks are unable to provide such long term finance...as their funds mature in the medium term.
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