IDFs or Infrastructure Debt Funds sponsored by NBFCs and banks in India can be invested in through the bonds or units issued by such funds. The new investment vehicle feature high risk, longer term and illiquidity.
Despite provision of investment in such funds by the insurers, being a novel investment vehicle exposure is set to be low. With investment in infrastructure, IRDA said deployment of funds into the novel investment vehicle will be done on a case to case basis.
In August last year, easing norms in relation to investment by insurers, IRDA allowed insurers to stake funds in debt funds and private equity. In this reespect, IRDA was quoted in one of the business dailies remarking "Insurers are permitted to invest in Category I & II AIFs (Alternative Investment Funds) under the extant SEBI regulations." AIFs are funds pooled from India as well as overseas for investments according to a policy decided in advance. With some set limits, insurers were given the provision to invest in venture funds and AIFs.
Currently, several IDFs including IL&FS Infrastructure Debt Fund India and Infradebt Limited and are in place and more are in the pipeline as banks are in the process of putting them forth.