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View: India’s new bank for infra financing is clearly mandated to have a ‘developmental role’

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And it finally gets an institutional structure that can be a receptacle to monetise global goodwill into friendly funding from all over the world.

Synopsis

As Nirmala Sitharaman let us know on Tuesday, it is to start with an equity base of Rs 20,000 crore — the largest-ever institutional startup — plus a one-time Rs 5,000 crore grant from the government. This will enable leveraging Rs 3 lakh crore additional funding for projects over the next three years. That is 12 times leveraging as a starting torque.

Infrastructure financing is a unique animal. There are development, construction and operating risks in which existing financing institutions have demonstrated their inadequacies in handling all or most of the links in this chain. Infra financing is also about nation-building, large public works and ‘development projects’ that may not necessarily provide a financial rate of return (RoR) in the short and medium term, but have huge multiplier

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