The government is weighing a raft of proposals, including relaxing rules to enable insurance firms and pension funds to put in long-term capital in infrastructure projects, as it seeks to spur job creation and bring the Covid-hit economy back on track fast.
Extant regulatory norms effectively bar these investors, that bring in patient capital, from funding private-sector special purpose vehicles (SPVs), while most infrastructure firms are set up as SPVs. These long-term investors are also required to invest primarily in highly safe instruments.
These instruments, such as government and public-sector bonds, often fetch measly returns. Similarly, various institutional investors face restrictions in funding infrastructure projects that are not rated AA or above, even though most of these projects rarely have ratings of BBB or above.
