State-owned India Infrastructure Finance Company Ltd (IIFCL) has announced to raise Rs 10,000 crore through tax-free bonds in addition to the Rs 10,000 crore announced by the union government for infrastructure sector in the economic stimulus package. The amount would be used to refinance the bank loans that have been taken for various infrastructure projects.  

IIFCL is optimistic about the large scale participation of individual investors as government would provide sovereign guarantees on these bonds. Banks and financial institutions can avail refinance facility at 10 per cent. Thus, infrastructure sector can get funds at 11 per cent to expand the national highway projects.

The maturity period for the first tranche would be five years. However, it may increase for second tranche. The chairman and managing director of IIFCL, S S Kohli said that infrastructure sector is a demand booster for other economic segment. The company would do its best to complete the entire exercise as soon as possible to increase demand for other sectors.

Union government is likely to approve these bonds by the week end as former Union Finance Minister P Chidambaram had already approved new bonds. The planning commission has also asked to re-finance the infrastructure loans using foreign reserves. But RBI is not in favor to use foreign exchange reserves for loan refinancing.