The State Bank of India (SBI) may partner with the Life Insurance Corporation of India (LIC) and India Infrastructure Finance Company Limited (IIFCL) to set up a credit enhancement fund that will provide guarantees to lower-rated bonds issued by infrastructure companies and bolster their ratings. The fund’s initial size could be Rs 5 billion and the guarantee provided by this fund will help firms raise money at lower interest rates as well as tap insurance and pension funds. The proposed fund was earlier to be set up by the LIC but there were some concerns over regulatory issues. It has been now decided that LIC will act as one of the partners. At a later stage, multilateral institutions could be roped in.
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