She said that one thing that can help in garnering funds is credit ratings.
Generally, an entity with a higher credit rating will be able to raise funds more easily compared to those having less credit worthiness.
“Now, the question is to get credit rating. The beautiful part (of) what we have learnt over the last few years’ issuances that we have had is (the) structure of creating escrow accounts and therefore, ring fencing certain cash flows. It has really created a fantastic structure in which investors have a lot of faith,” the Sebi Chairperson said.
Such an escrow account structure will give investors an understanding of “what is outside the ring fence” and they don’t need to worry about every single aspect of a municipal corporation.
“They (investors) need to worry (only) about the larger balance sheet… they only need to worry about what is inside the escrow account. This simplifies the life of everybody quite a lot.
“This escrow (account) mechanism should really become digital and once that happens, credit rating automatically becomes, let’s say, investment grade,” Buch said. Participating in a workshop organised by G20 Infrastructure Working Group, she also mentioned mechanisms available for credit enhancement and those can be potentially used for giving a certain amount of credit guarantee.
“A combination of escrow (account structure) and credit enhancement can attract a large number of investors in urban infrastructure.
“Our life in the market is very simple. You will have demand (once) you will have the supply, (then) price is thus determined. That is what (an) efficient market should do,” Buch said.
There is an increased focus on developing urban infrastructure projects as the economy grows.
“We actually believe there is just billions of dollars waiting to come in to support urban infra projects,” Buch said.
SBI Chairman Dinesh Kumar Khara said Infrastructure Investment Trust (InvITs) can also be leveraged by municipal authorities to augment their funding.
