Securitization and Credit Enhancement for Catalyzing Infrastructure Financing

As India is keen to develop large infrastructure projects where the private sector is expected to raise funds from the market, there is need to develop new financial instruments for the debt market as well as for risk capital.Securitization of debt allows banks and FIs to recycle their funds quickly rather than locking them up for years together. Risk capital for large projects is also scarce as a few ‘small' contractors are becoming developers and do not have enough risk capital. An appropriate regulatory environment should help assist development of securitization market as per the needs of the infrastructure sector.The paper suggests that there are substantial opportunities for securitization to assist financing of large infrastructure projects like Ultra Mega Power Projects (UMPPs), Delhi–Mumbai rail corridor, airport modernization, and greenfield airports. Similarly, innovative solutions are also applicable by pooling in small infrastructure projects like roads, bridges and so on. However, these could deliver results only if there is adequate credit enhancement available for such securities and there is some level of standardization to assist pooling of assets