As per the Cabinet note by the finance ministry, the IIFCL will depend on the project appraisal undertaken by leading banks, instead of the IIG, which consists of Infrastructure Development Finance Company, State Bank of India, Life Insurance Corporation, IDBI Ltd, Punjab National Bank and Bank of Baroda.
"The government opted to make the SPV's functioning more open-ended as private and foreign banks are now taking active interest in infrastructure financing," a government official told Business Standard.
After a meeting of the committee on infrastructure, the finance ministry is circulating the final Cabinet note, which will be taken up by the Cabinet Committee on Economic Affairs shortly.
The finance ministry has also agreed to reduce the guarantee fee for IIFCL's borrowings from the usual 1 per cent to 0.25 per cent. The move is aimed at reducing the cost of funds.
The government has decided to grant flexibility to the SPV - to be registered as a non-banking finance company under the Companies Act, 1956 - in choosing a mix of borrowings.
As per the proposal, IIFCL can lend directly to public sector projects and to those taken up through the public-private partnership route.
In case of private projects, the Planning Commission has advocated that the SPV should only undertake refinancing. The finance ministry, however, wants the company to simplify it further by saying funding to private projects would be "largely refinance".
The Planning Commission and North Block have, narrowed down their differences on the appointment of directors.
While it was proposed to have a board comprising five directors with some government nominees, the Cabinet note has proposed that the company should have seven directors with one nominee each from finance ministry and the Planning Commission.
Prime Minister Manmohan Singh recently met Finance Minister P Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia desired that the matter be taken up by the Cabinet soon.
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