“India is expected to spend around Rs 100 trillion on infrastructure through the National Infrastructure Pipeline in the next five years. This requires bank guarantees of around Rs 90 lakh crore in the next five years which banks currently do not have capacity for. This is where surety bonds need to step in as a complement to bank guarantees with India estimated to be the third largest country with infrastructure activity by 2030” Debasish Panda, chairman, IRDAI
New Delhi:
Debasish Panda, chairman, Insurance Regulatory and Development Authority of India (IRDAI) has urged all the stake holders to work collaboratively within the existing regulatory framework to develop a much needed Surety bonds market to aid the government’s big push in the Rs100 trillion infrastructure area.
“India is expected to spend around Rs 100 trillion on infrastructure through the National Infrastructure Pipeline in the next five years. This requires bank guarantees of approx Rs 90 lakh crore in the next five years which banks currently do not have capacity for. This is where surety bonds need to step in as a complement to bank guarantees with India estimated to be the third largest country with infrastructure activity by 2030,” said Panda.
Panda was speaking at a roundtable on Monday in New Delhi on the issue of financing of infrastructure projects in the country, participated by key stakeholders, including senior officials from Ministry of Finance, National Highways Authority of India (NHAI), representatives from several insurance companies, reinsurance companies, the World Bank, other public and private banks, infrastructure companies, and insurance brokers, on how to develop a appropriate Surety Bond market in the country.
With such a large market potential, Panda exhorted all the stakeholders to come together and reap the rich potential which this segment offers. He further pointed out that the current regulatory framework presented the general insurance industry a unique opportunity to diversify their portfolio and play an important role in nation building.
The meeting was organised by trade and industry lobby body CII and and The Infravision Foundation (TIF) and focused on the financing of infrastructure projects in the country as part of the massive push to the sector by the government of India by allocating Rs 10 lakh crore towards it in the Union Budget 2022-23.
The government has already announced surety bonds, but the implementation can be faster. Surety bonds have a robust $20 billion market in advanced economies, and it is about time they were widely used in India, noted Vinayak Chatterjee, founder and managing trustee of TIF.
He advocated a structure where the traditional banking structure and the insurance sector could work in partnership with each other.
Tapan Singhel, CEO, Bajaj Allianz General Insurance said the success of surety bonds is critical to the growth of the economy envisoned by the government.