General Studies · Infrastructure Funding and Asset-Liability Management
A global fund wins a 20-year concession to operate a highway under the Toll-Operate-Transfer (TOT) model and seeks long-term debt financing from a bank. Which of the following describes an appropriate banking mechanism to finance such long-term infrastructure concessions while mitigating Asset-Liability Mismatch (ALM)?
- 1The bank should classify this as a Social Infrastructure loan to relax regulatory requirements.
- 2The bank must limit the loan tenure to 5 years and require mandatory refinancing every 5 years.
- 3The bank can provide the loan and mitigate the mismatch risk by issuing long-term Infrastructure Bonds, which enjoy exemptions from CRR and SLR requirements.✓
- 4The bank should reject the loan because financing upfront fees for government concessions is prohibited.
Correct answer
The bank can provide the loan and mitigate the mismatch risk by issuing long-term Infrastructure Bonds, which enjoy exemptions from CRR and SLR requirements.
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