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The proposal for a credit enhancement fund was first announced in the budget for fiscal 2016-17 by then Finance Minister Arun Jaitley. But since then, the scheme has not taken off due to various regulatory hurdles.A senior government official said that a plan is being finalized under which infrastructure financing firm, India Infrastructure Finance Co Ltd (IIFCL) would become the premier infrastructure financing institution.In the new framework, the IIFCL will not only offer funding support to projects but it will also carry out the function of credit enhancement, enabling infra companies easier access to credit. This would be done through creation of a special purpose vehicle - the National Infrastructure Credit Enhancement Ltd or NICE, to be piloted by the IIFCL. The NICE will function as a dedicated credit enhancement NBFC.While tax relief for housing sector is on cards in the Budget to give a leg up to infra development, the credit enhancement fund piloted by the IIFCL's SPV would facilitate infrastructure investments by insurance and pension funds. The NBFC will also seek to bolster lower-rated bonds issued by companies in the sector by providing its own balance sheet support to viable projects. More than 85 per cent of corporate bond issuance in India is by borrowers with ratings of 'A' and above, according to RBI data.It is expected that the credit enhancement SPV will also get equity support from National Housing Bank (NHB) and National Bank for Agriculture and Rural Development (Nabard) but the IIFCL will be the main stake-holder. The NBFC may also get funding support from the government through the Budget so that the entity starts its work with a minimum fund size of Rs 500 crore, sources said.The Centre had earlier mooted the idea of the IIFCL and several state-owned institutions like the LIC, the State Bank of India and the Bank of Baroda to come together to set up a dedicated credit enhancement company as a non-banking finance company. But IRDA regulations prevented the LIC from being part of the fund while the banks could not participate due to rising NPAs and other commitments.The government is looking to bolster infrastructure investment as it is key for boosting growth in the economy. It is estimated that India needs $4.5 trillion to be spent on infrastructure developments over the next 25 years. But it is expected to garner a lot less. Innovative funding and financing schemes is being looked to bridge the deficit and allow the sector to grow at desired pace.(Subhash Narayan can be reached at subhash.n@.in)( With inputs from IANS )

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