Maharashtra plans own NBFC to give cheaper loans to infrastructure projects
The state finance department has begun work on a government-owned non-banking financial company to fund infrastructure at lower interest and refinance costly loans.
The Maharashtra government's finance department is set to create its own non-banking financial company (NBFC), being described as a kind of "government in-house bank". The department has already started work on the project. The aim is to move towards the goal of a $5 trillion economy and "Viksit Maharashtra 2047".
An advisory agency will soon be appointed to prepare the full blueprint. It will be a subsidiary of a Central or state public sector bank, or of a government-sector entity, with experience of raising Rs 20,000 crore in capital or debt. The agency will work on the structure, legal processes and overall blueprint of the institution. The selection process will be completed in the first week of October. The government has also set a timeline for completing the project in five main stages.
According to information available, the government has estimated that investment of about Rs 25 lakh crore to Rs 35 lakh crore will be needed over the next decade for major projects in metro rail, expressways, smart cities, water projects, sewerage, affordable housing and social infrastructure such as health and education.
Until now, government bodies such as the MMRDA, MSRDC, CIDCO, Maha Rail and MIDC have either borrowed from various commercial banks at high interest or depended on the government budget. To address this problem, the government is setting up its own NBFC, which will pool the surplus money lying with all government departments.
This pooled capital, along with cheaper funds raised in international markets, will be used to lend to the government's own projects at low interest. The main objective is to save taxpayers' money and complete all the state's major infrastructure projects quickly, without financial hurdles.
If registered under the Reserve Bank of India's scale-based regulation, the entity will lend only to state government departments, bodies and development authorities. No private party will be given loans. Government bodies' bonds will also get credit guarantees and liquidity support. It will also manage special funds such as the Maharashtra Infrastructure Fund, Urban Infrastructure Fund, Climate Finance Fund and Affordable Housing Fund.
At present, the state budget and the debts of various corporations are scattered. The new NBFC will work as a centralised treasury manager for the state government, so that development work does not face a cash shortage. Agencies such as the MSRDC, MMRDA, CIDCO, MIDC and water boards have already taken loans from commercial banks at high interest.
The new NBFC will raise funds at low cost from national and international markets and refinance these bodies' older, costly loans at lower interest. This will save thousands of crores of rupees in interest, which can be put directly into new projects.
