AIIB is in advanced talks with different nodal agencies, including Chennai Metro Rail and the Mumbai Metro Rail Corp, two people with direct knowledge of the matter told ET. The supranational lender is expected to sign financing agreements with these two railroad operators.
It may invest $400 million each in the two metro projects. In Bangalore, it has decided to invest $350 million.
“I can confirm we are in talks, but there is still due diligence to be completed and board approvals needed before we can say definitively that these projects will be funded by AIIB,” said Laurel Ostfield, director general, communications, at AIIB.
Current proposals include lending another $500 million to the Mumbai Urban Transport Project 3A (MUTP 3A), which consists of infrastructure projects worth around Rs 34,000 crore. AIIB may also extend credit of $350 million to the Mumbai Metropolitan Region Development Authority.
In a commercial project, AIIB expects an IIR (Internal Rate of Return) of about 10-12 percent.
The global lender, which has a disposable sum of $20 billion, wants to increase the share of lending in India, where banks often shy away from long-term project financing due to billions of dollars in bad loans.
In Chennai, AIIB plans to invest another $400 million in a ring road project that is supposed to connect the main city with its Information Technology hub.
“AIIB is keen on India’s urban infrastructure development as it provides long-term financing. It is currently finalising terms of agreements with multiple metro rail corporations and nodal agencies,” said an executive with direct knowledge of the matter.
AIIB now predominantly invests in projects owned by the government.
Besides transport and railways, it loans funds to sectors such as energy (transmission) and water.
It is now only into dollar-denominated lending but plans to develop a system where it can extend credit in rupee terms.
“AIIB is now developing a rupee lending system through hedges and swaps,” D J Pandian, vice president at AIIB, had said last week in Mumbai.
“Money is not a problem with us but quality projects. We are keen to raise investment private sector.”