Infrastructure Investment Trusts
- Infrastructure and real estate are the two most critical sectors in any developing economy. A well-developed infrastructural set-up propels the overall development of a country. It also facilitates a steady inflow of private and foreign investments, and thereby augments the capital base available for the growth of key sectors in an economy, as well as its own growth, in a sustained manner.
- Given the importance of these two sectors in the country, and the paucity of public funds available to stimulate their growth, it is imperative that additional channels of financing are put in place.
- An Infrastructure Investment Trust (InvITs) is Collective Investment Scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as return. The objective of InvITs is to facilitate investment in the infrastructure sector.
- The InvIT is designed as a tiered structure with Sponsor setting up the InvIT which in turn invests into the eligible infrastructure projects either directly or via special purpose vehicles (SPVs).
- SPV is an entity which is formed for a single, well-defined and narrow purpose. An SPV can be formed for any lawful purpose.
- InvITs can be established as a trust and registered with Securities and Exchange Board of India (SEBI).
- The InvITs are regulated by the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
Why in News?
- Financial experts have noted that changes to the Infrastructure Investment Trusts structure and regulations are among crucial modifications required to attract retail investors to the National Monetisation Pipeline.
- They suggested the government to extend Insolvency and Bankruptcy Code provisions to InvITs which would help lenders access a faster and more effective debt restructuring and resolution option.
- Refer Pulse Issue no. 10 for more information about Insolvency and Bankruptcy Code.
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