Financial Action Task Force

Discussion on India´s Progress in the Financial Action Task Force Plenary in Mexico

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India joined the Financial Action Task Force (FATF) as its 34th member in June 2010. At present FATF has 36 members comprising of 34 countries and two organizations namely, the European Union and the Gulf Cooperation Council. At the time of joining FATF, India gave an Action Plan to overcome certain deficiencies in a time bound manner. The items of the Action Plan were divided into Immediate, short term and Medium term items, which were to be completed by 30.6.2010, 31.3.2011 and 31.3.2012 respectively. India has completed the Immediate and Short term Action Plan items within the stipulated time and the same have been acknowledged by the FATF technical onsite team which visited India in April 2011.

India is participating in the Financial Action Task Force (FATF) plenary and working group meetings being held in Mexico City, Mexico from 20-24 June 2011. The plenary meeting discussed India´s Follow up Report of the FATF technical onsite team which visited India in April 2011 to assess India’s fulfilment of its Short term Action Plan and if it is on track to fulfil its Medium term commitments. . The FATF secretariat commended India´s commitment to a strong Anti Money Laundering/Combating Financing of Terrorism (AML/CFT) regime and acknowledged that India has made significant progress on all action points as per the time schedule. This view was shared by the FATF Plenary. India assured FATF that the Hon´ble Finance Minister of India is personally monitoring the progress of our country in conforming to the FATF standards. Under his initiative, the Financial Stability and Development Council has been formed which is also tasked with inter ministerial coordination to ensure compliance with India´s international obligations. India is also committed to financial inclusion to ensure that the fruits of increased economic prosperity reach the economically weaker sections of society. As a democratic and pluralistic nation which has achieved an average GDP growth rate of 8.5% per annum over the last five years, India is suitably placed to play an active role in international AML/CFT efforts. The international community praised India´s progress in improving its AML/CFT regime.

In the Working Group meetings, India played an enhanced role as the co-chair of the Asia Pacific Regional Review Group of FATF, reporting on Asia-Pacific nations’ compliance levels with the FATF´s recommendations.

The Indian inter-ministerial delegation was led by Mr. Bimal Julka, Additional Secretary & Director General (Currency) in the Ministry of Finance.

FM - Setting- up of Infrastructure Debt Fund through Public Private Partnership would meet the long term need of Infrastructure Sector funding

The Union Finance Minister Shri Pranab Mukherjee said that setting up of Infrastructure Debt Fund through public private partnership would meet the long term need of infrastructure sector funding. The Finance Minister Shri Mukherjee said that he is confident that the establishment of Infrastructure Debt Fund through PPP model would be a guiding principle for our future activities. The Finance Minister said that funs to the tune of 1Trillion US$ would be required for Infrastructure Sector Funding in next five years, out of which 50 percent would come from private sector through PPP model. The Finance Minister was speaking after a Memorandum of Understanding (MOU) was signed, here today in his presence for setting-up India's First Infrastructure Debt Fund(IDF) structured as a Non-Banking Finance Company (IDF-NBFC). The MoU was signed by Ms. Chanda Kochar, Managing Director, ICICI Bank, Shri Pramit Jhaveri, CEO, CITI Bank, Shri M.D. Mallaya, CMD, Bank of Baroda and Shri Sushobhan Sarkar, MD, LIC. Others present on the occasion include Dr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, Shri Gajendra Haldia, Member, Planning Commission, Shri R.S. Gujral, Finance Secretary, Shri R. Gopalan, Secretary, Economic Affairs, Shri Sumit Bose, Secretary, Expenditure, Shri Haleem M. Khan, Secretary, Disinvestment and Shri Bimal Julka, Addl. Secretary cum Director General, (Currency),Ministry of Finance alongwith other senior officials of the Ministry of Finance, representatives of Regulators and Financial Institutions among others.

The Union Finance Minister Shri Pranab Mukherjee in his Budget Speech for 2011-12 had announced setting-up of Infrastructure Debt Funds (IDFs) in order to accelerate and enhance the flow of long term debt in infrastructure projects for funding the government's ambitious programme of infrastructure development. To attract off-shore funds into IDFs, the Finance Minister had also announced that withholding tax on interest payments on the borrowings by the IDFs would be reduced from 20% to 5%. Income of the IDFs has also been exempt from incometax.

The framework for establishment of IDFs was announced by the Ministry of Finance in June, 2011 wherein IDFs were allowed to be set up either structured as a non banking financial company (NBFC) or as a mutual fund. Reserve Bank of India issued the regulations for IDFs to be set up as a NBFC in November, 2011 and Securities Exchange Board of India issued the regulations governing an IDF structured as a mutual fund in August, 2011.

  

ICICI Bank (together with a wholly-owned subsidiary), Bank of Baroda, Citi and LIC will hold 31%, 30%, 29% and 10% shareholding respectively in the IDF-NBFC. The IDF would seek to raise debt capital from domestic as well as foreign resources and would invest in infrastructure projects under the Public-Private Partnership model that have completed one year of operations. The IDF will expand and diversify the domestic and international sources of debt funding to meet the large financing needs of the infrastructure sector, thereby giving an impetus to the creation of the infrastructure necessary to drive India's growth.