Infrastructure Investment Trusts (InvITs)

Infrastructure Investment Trusts (InvITs)

Subject – Economy

Context – Union Finance Minister Nirmala Sitharaman will soon chair a meeting of the Financial Stability and Development Council (FSDC) to nudge financial regulators to relax and harmonise investment norms for instruments such as Infrastructure Investment Trusts (InvITs) to be used to monetise public assets such as highways, gas pipelines and railway tracks.

Concept –

• An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return.
• InvITs work like mutual funds or real estate investment trusts (REITs) in features.
• InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.
• SEBI notified the SEBI (Infrastructure Investment Trusts) Regulations, 2014 providing for registration and regulation of InvITs in India.
• The purpose of InvITs is to enable Infrastructure Companies to repay their debt obligation quickly and effectively. Since infrastructure-oriented projects tend to take time to generate substantial cash flow, InvITs come in handy for paying off loan interests and other expenses conveniently.