The government will set up the CGEC soon, a senior government official told ET. “It (CGEC) will be set up with an authorised capital of Rs 20,000 crore and provide guarantee to bonds issued by completed projects,” said the official, requesting not to be identified. “Rs 500 crore has already been provided as initial corpus.”
Finance minister Nirmala Sitharaman had announced in the budget for 2019-20 that such an entity would be set up to increase sources of capital for infrastructure financing.
“We recognise that investment driven growth requires access to low-cost capital. It is estimated that India requires investments averaging Rs 20 lakh crore every year,” Sitharaman had said while delivering her maiden budget speech on July 5. She had said that the proposed entity would be set up in 2019-20 and that the regulations had been notified by the Reserve Bank of India.
Credit enhancement helps issuing companies improve their bond ratings, as bond payment is guaranteed to a certain limit. The issuer also gets access to markets at cheaper rates than borrowing from banks.