NEW DELHI: Indian Bank, Oriental Bank of Commerce, Corporation Bank and India Infrastructure Finance Company (IIFC) on Monday inked a memorandum of understanding to jointly undertake financing of infrastructure projects.

Under the arrangement, IIFC will finance 20 per cent of the project cost, while the three banks would share the balance.

Indian Bank, OBC and Corporation Bank had recently formed an alliance to share each other's infrastructure, enter new businesses and set up joint ventures.

The MoU is the first major move by the alliance.

"Two road projects have been identified for co-financing by the four entities,'' a senior official of Indian Bank said.

IIFC is expected to take a larger exposure and the three banks will supplement it by making some investments in the projects selected.

Under the agreement signed, the banks will do the project appraisal, while project financing will come from the all four entities.

Expert services

Special Secretary (Finance), Banking Division, Vinod Rai, who was present on the occasion, mooted the idea of floating a company by them for effective project appraisal as this was a vital task and this agency could offer expert services to those implementing infrastructure and other projects.

He said lack of appraisal skills was a problem among public sector companies, and suggesting that the four entities should set up a company exclusively for appraisal purposes. He said the best people should be hired from the market for the appraisal company, which could undertake project appraisal for other companies for a fee.

"Infrastructure requires about $360 billion in the next five years, which will be by way of equity and debt,'' IIFC Chairman S. S. Kohli said, adding that IIFC could invest up to 20 per cent of the project cost.

Indian Bank Chairman K. C. Chakrabarty, Oriental Bank of Commerce Chairman K. N. Prithviraj, and Corporation Bank Chairman B. Sambhamurty were enthusiastic about the alliance and felt that all would benefit while funding infrastructure projects.

Indian Bank's IPO

Indian Bank will hit the capital market with an IPO of 8.9 crore shares in January next to raise Rs. 800-1,200 crore to augment its capital base and support business expansion plans.

According to a senior official, the bank plans to offload 8.9 crore shares at a price to be decided through the book-building process. The offloading will be to the extent of 25 per cent of the paid up capital of Rs. 343.82 crore or 34.382 crore shares.

Printer friendly page  
Send this article to Friends by E-Mail