[image: The Financial Express] <http://www.financialexpress.com/>  * Money &
Banking*

  *IL&FS-led consortium sets up Rs 3,000-crore fund *
Banking Bureau
*Bangalore, Oct 13 * A consortium of 15 banks and financial institutions has
set up a Rs 3,000-crore Pooled Municipal Debt Obligation (PMDO) facility to
supplement the government funding to municipal corporations and other urban
local bodies to improve the civic services in different states.

The consortium is led by Infrastructure Leasing and Financial Services
(IL&FS), IDBI, Canara Bank and India Infrastructure Finance Company Ltd
(IIFCL). The objective of PMDO is to ensure that municipal corporations can
access these funds under a common governance framework in an efficient and
transparent manner.

Under this arrangement, term loans would be made available to the municipal
corporations and other urban local bodies at 9.5% interest rate. In an
agreement executed by 15 banks and financial institutions, the fund is
initially closed at Rs 2,750 crore but IL&FS officials said that the corpus
of the fund can swell up to Rs 5,000 crore. According to IL&FS officials,
the World Bank, Asian Development Bank (ADB) and IFC have also shown
interest in participating in this programme.

"Urban local bodies are in a state of flux today. They know what to provide
but does not know how to provide it. They are habituated in receiving grants
and not debts," said Vinod Rai, special secretary, ministry of finance.


URL: http://www.financialexpress.com/fe_full_story.php?content_id=143396


*Rs 3,000 cr Bank-FI fund to upgrade Karnataka civic facilities*

Bangalore, Oct 14. (PTI): A consortium of 15 banks and financial
institutions has created a Rs 3,000 crore corpus to supplement Government
funding to municipal corporations and other urban bodies to upgrade civic
services in Karnataka.

The consortium led by IL&FS, IDBI, Canara Bank and India Infrastructure
Finance Company Limited (IIFCL) executed agreements at a function here on
Friday.

The arrangement called the 'Pooled Municipal Debt Obligation Facility'
(PMDO) has been structured to ensure that municipal corporations can access
these funds, at an interest of 9.5 per cent, under a common governance
framework, said IL&FS Chairman Ravi Parthasarathy.

The facility will part finance construction of a wide range of civic
infrastructure assets as part of an overall plan of the municipal
corporations as approved under the Jawaharlal Nehru National Urban Renewal
Mission (JNNURM) or other schemes of the Government of India.

"It (the new initiative) must succeed", said Vinod Rai, Secretary-Banking,
Ministry of Finance, who added that the consortium should also do
"hand-holding" as urban civic bodies are not used to receiving debt.

The facility, which would also be utilized to refinance high cost municipal
debt, will be managed by IL&FS.

Officials said the corpus could swell to Rs 5,000 crore.

IL&FS officials said the World Bank, IFC and ADB have evinced interest in
participating in the initiative and negotiations are on with them.

 


*Date:15/10/2006* *URL:
http://www.thehindu.com/2006/10/15/stories/2006101502081300.htm*
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Business <http://www.thehindu.com/2006/10/15/06hdline.htm>

* Banks, FIs set up PMDO facility *

P. Manoj

* It has a Rs. 3,000 crore corpus; will finance municipal projects *

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* *
*Disbursal will be linked to reforms *
*It will supplement government funding *
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BANGALORE: A consortium of 15 public sector banks and financial institutions
led by IL&FS, IDBI, Canara Bank and India Infrastructure Finance Company
Limited (IIFCL) has set up a Rs. 3,000 crore Pooled Municipal Debt
Obligation (PMDO) facility to supplement government funding to municipal
corporations and other urban local bodies (ULBs) for upgrading civic
services under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).


Pradeep Puri, CEO, National Urban Infrastructure Fund, IL&FS, said here on
Friday that disbursal from the PMDO facility would be linked to reforms
undertaken by the municipalities and ULBs relating to their accounting
practices and levy of user fees. Municipalities and ULBs would have to open
an escrow account facility from the revenues generated through levy of user
fees to meet their debt service obligations. IL&FS would have the first
charge on the escrow account.

 Rs. 3,000 cr. corpus

 Other lenders to the PMDO facility include LIC, Indian Bank, Syndicate
Bank, Union Bank of India, Central Bank of India, Dena Bank, Corporation
Bank and Oriental Bank of Commerce. The Rs. 3,000 crore corpus will have a
tenure of 13 years, including a three-year moratorium and a ten-year
repayment period and carries an interest rate of 9.50 per cent.

IL&FS is in discussions with multilateral agencies such as the World Bank
and the Asian Development Bank (ADB) to participate and expand the corpus
under the PMDO facility to meet the aggregate debt size of about Rs. 70,000
crore for implementing the JNNURM across the country.

Ravi Parthasarathy, Chairman, IL&FS, said it was in discussions with the
Securities and Exchange Board of India (SEBI) as well as the Reserve Bank of
India (RBI) to ensure that the fund was structured in a manner that it does
not become a capital market exposure to protect the interests of
participating banks.

Vinod Rai, Special Secretary, Banking, Union Ministry of Finance, underlined
the need to put in place a couple of culture paradigms and discipline to
ensure that municipalities and ULBs return the loan taken from the PMDO
facility. "The entities receiving funds from the PMDO facility are not
habituated to receiving debt, but are habituated to receiving grants. But,
they have no option but to pay back from Day One," Mr. Rai said.

The PMDO will part finance a wide range of civic infrastructure assets as
part of an overall plan of municipal corporations as approved under the
JNNURM or other schemes of the government. The facility will be managed by
IL&FS, which will also work with municipal corporations to ensure that the
projects are appropriately prepared, tendered and implemented on an
integrated basis.

The PMDO facility has been structured to ensure that municipal corporations
can access these funds under a common grievance network.

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