The partial credit guarantee (PCG) for private developers through a new infrastructure risk guarantee fund will provide lenders with an important risk mitigation tool, lowering the cost of capital and helping channel investments to both long-gestation and urban infrastructure projects.The new fund, the size and scope of which is yet to be defined, is aimed at strengthening the confidence of private entities, especially during the development and construction phase of infrastructure projects, finance minister Nirmala Sitharaman said.
Rajkiran Rai, managing director at the National Bank for Financing Infrastructure and Development (NaBFID), said the credit guarantee would help mitigate risks, especially in urban infrastructure projects linked to municipalities like solid waste management projects, urban transport, irrigation, and drinking water.
Rajkiran Rai, managing director at the National Bank for Financing Infrastructure and Development (NaBFID), said the credit guarantee would help mitigate risks, especially in urban infrastructure projects linked to municipalities like solid waste management projects, urban transport, irrigation, and drinking water.
“These projects are otherwise considered risky to implement, especially in the initial stages. They need support in the initial stages for them to be successful, as, unlike highway or road toll projects, the revenue stream is not very clear. A credit guarantee will reduce the cost of capital, making the services cheaper to the public, giving comfort to lenders,” Rai said.
Bankers said the PCG could be provided from the government’s trustee company, the National Credit Guarantee Trustee Company, which was used to give post-Covid relief to many sectors during the pandemic and is providing government support to MSMEs and exporters.
