Union Road Transport and Highways minister Nitin Gadkari on Wednesday pitched for formulating a policy for using the Reserve Bank of India's rising foreign exchange reserves for funding road projects, saying the country needs low cost finance for such infrastructure projects.

Addressing a virtual event organised by industry body CII, Gadkari further said that the National Highways Authority of India (NHAI) should also have a financial arm like the Power Ministry's Power Finance Corporation (PFC).

"We have a surplus of dollar reserves in the country. I have decided to talk with the RBI Governor, about how we can formulate a policy by which we can use this foreign exchange reserves for development of infrastructure in the country," he said.

The country's foreign exchange reserves surged by USD 9.427 billion to a record high of USD 620.576 billion in the week ended July 30, according to the latest RBI data.

Recently, a Parliamentary panel has also suggested that India's foreign exchange reserves have risen substantially in the recent past, and the RBI, with due consideration to the sufficiency of the foreign reserves, may consider the possibility of utilisation of surplus funds to finance long-term road infrastructure projects.

"RBI may also look into the feasibility of utilization of the surplus reserves for the creation of a sovereign wealth fund to finance long-term infrastructural assets," it had said.

Gadkari pointed out that he is talking to the World Bank, the Asian Development Bank and the New Development Bank NDB) for infrastructure funding in India, but he is not satisfied by their response.

"So, we need some financial institutions, those who can reduce interest cost for infrastructure," he said, adding that the Indian Railways has got Indian Railway Finance Corporation (IRFC), the Power Ministry has got Power Finance Corporation but NHAI does not have any financial arm.

"We need one institution, where NHAI stakes are there and financial institution stakes are there. With a joint venture we can formulate the policy," Gadkari suggested.

The minister also suggested that in place of a 2 per cent bank performance guarantee, the entire project can be insured and the road ministry's proposal is pending with the Insurance Regulatory and Development Authority of India (IRDAI) and the finance ministry.

"So, somewhere there is a problem with financial institutions... Getting cooperation from banks for road projects is not so easily available, because of previous track record, banks are not in a position to support contractors," he noted.

Gadkari said the road ministry is planning to raise Rs 1 lakh crore through monetisation of highways projects.

"If there are some foreign investors, who are ready to invest in road construction, and ready to give me loans in dollars but hedging will be their responsibility, I am ready to make some new system... to use foreign investment for that (road infrastructure projects)," he said.