Refinance Scheme

New Refinance Scheme of IIFCL
 
1. Objective:
The primary objective of IIFCL’s refinance scheme is to augment increased flow of funds for the development of infrastructure in the country. Under the scheme IIFCL will provide refinance to the banks and financial institutions in respect of their lending to infrastructure projects.
 
2. Eligibility:
(i)                 Eligible Institutions:
a)      Scheduled Commercial Banks in India[1]
b)     Public Financial Institutions notified under Section 4 (A) of the Companies Act, 1956.
(ii)              Eligible Infrastructure Projects: Infrastructure projects from any of the sectors as defined under SIFTI.
 
3. Extent of Refinance:
IIFCL shall provide refinance up to 80% of the loans outstanding to eligible borrowing institutions. 
 
4. Rate of Interest:
The Rate of Interest may be linked to the Benchmark Rate of IIFCL based on the credit rating of the institution as below:

External Rating of the institution to which refinance is being offered
Minimum Interest Rate to be charged
AAA or equivalent
IIFCL’s Benchmark Rate
AA/AA+/AA- or equivalent
IIFCL’s Benchmark Rate + 15 bps
A/A+/A- or Equivalent
IIFCL’s Benchmark Rate + 30 bps

The refinance rates may be reset annually or periodically.
 
5. Tenor of Refinance:
The maximum tenor of refinance may be based on the prevailing liabilities profile of IIFCL with the minimum tenor being at least one year.
 
6. Repayment of Refinance:
The repayment of principal and payment of interest may be on monthly/quarterly basis. Repayment of principal may be structured to include equated instalments, structured repayments, bullet repayments, etc. The due dates of payment of interest and principal shall be informed to the eligible institutions in the repayment schedule after each release of refinance.
 
7. Exposure of IIFCL:
(i) The credit risk of the underlying loan(s) against which refinance is extended by IIFCL remains fully with the eligible borrowing institution to which refinance is extended. IIFCL’s exposure would be on the Eligible Institution to which Refinance is extended by IIFCL. The permissible exposure of IIFCL shall be subject to maximum regulatory exposure limits.
 
8. Other Terms of Refinance
a) The maximum time limit for availment of refinance is within three months from the date of sanction of refinance by IIFCL.
b) Failure to service debt obligations would attract a penal interest of 2% p.a. and IIFCL would have all the rights for recovery of such Refinance amount along with interest/penal interest/ expenses for recovery, fee, any other expenses in this regard, etc. from the eligible institution.
c) Prepayment of refinance shall attract prepayment penalty of 2% of the outstanding balance refinance amount.
 
d) The borrowing entities shall duly submit a certificate every quarter clearly indicating the outstanding balance in respect of each underlying project against which refinance has been availed.
 
e) The borrowing entities shall endeavor to avoid having adverse balance (outstanding balance of refinance being over 80% of the outstanding balance of the underlying project loans) in respect of refinance availed. In such cases, IIFCL reserves the right to levy additional interest of 2% p.a. for the adverse balance period. IIFCL shall allow prepayments in such cases, upto the extent of the adverse balance without charging any prepayment penalty. Alternatively, the borrowers may also substitute the existing underlying loans with fresh project loans subject to those loans being eligible under this Scheme [paragraph 2(ii)].
f) The Refinance portfolio of IIFCL shall not be more than 20% of its total advances.
 
***


IIFCL’s current Benchmark Rate for Refinance is annualised G-Sec rate for the respective tenor of refinancing + 110 bps.