New Delhi: The Saarc Development Fund (SDF) is planning a regional development bank to raise capital from the market and lend to projects in the region.

"We plan to convert the SDF into a regional development bank for Saarc countries in the near future, which could raise capital from the market," said Sunil Motiwal, CEO of the Saarc Development Fund, set up seven years ago to finance regional infrastructure and social development projects that involve two or more South Asian nations.

India has been involved in the New Development Bank, popularly known as the Brics bank, and is a junior partner in the Chinese-led Asian Infrastructure Investment Bank. Historically, it is a founder member of both the World Bank and the Asian Development Bank.

The proposed Saarc bank would for the first time make India a lead country in a multilateral financial institution. It means transforming the SDF, which is mainly involved in connectivity and electricity projects and livelihood projects for women, to take up more challenging tasks such as finding a buyer for Bhutan's hydel power, road and rail projects between India and Bangladesh, railway lines to Nepal and airports in Afghanistan.

Motiwal, however, cautioned that to reach there "we need to first strengthen our credit portfolio. We are doing that by going in for consortium financing with other development banks and agencies". Among existing and potential partners being looked at are the AIIB, World Bank, Asian Development Bank, European Bank for Reconstruction and Development, New Development Bank, Japan's Jica, UK's DFID and USA's USAID.

"My talks with officials from the AIIB, World Bank and ADB and others indicate they are quite willing to partner with us in capital-intensive projects, especially in the infrastructure sector ... India-Bangladesh road and railway connectivity are among projects we can look at," the SDF chief said.

"Once we have a lender's status we can raise funds from the capital market through various instruments like bonds."

The SDF has an authorised capital of $1.5 billion and a total capital base of $500 million, currently. It is working to increase its credit portfolio to $300 million in the next few years by financing a range of projects including renewable energy, road and telecom connectivity and environment in the Saarc region.