Four Indian financial institutions have joined hands to create the country's first fund designed to support the infrastructure industry.

ICICI Bank, Bank of Baroda, Citi Financial and LIC jointly established India's first Rs10,000 crore ($2 billion) Infrastructure Development Fund through a memorandum of understanding. The decision followed the Reserve Bank of India's approval to allow ICICI Bank to set up the IDF in February.

According to the agreement, the fund will have an equity capital of Rs300 crore, where 31 per cent will be held by ICICI, the sponsor, 30 per cent by Bank of Baroda, 29 per cent by Citi Financial and 10 per cent by LIC. In addition to the capital, an additional Rs300 crore will be raised as long-term debt. 

In 2011, the Ministry of Finance launched a framework for the establishment of IDFs, which are meant to attract offshore funds and enhance the flow of long-term debt for infrastructure projects in the India. Income from such funds are exempt from tax.

The new fund's focus will be on projects that have been developed or are being developed under the public private partnerships model, or businesses run through a partnership between government and at least one private sector firm. It will begin operations in 1 April.