Bank norms may be eased for big power projects

The Reserve Bank of India (RBI) is considering an easing of banks' exposure norms to power projects, in order to facilitate financing of the ultra mega power projects.

Under RBI norms, a bank can extend loans up to 15 per cent of its net worth to a single entity and 40 per cent to a group.

However, for infrastructure projects, the single entity exposure can go up to 20 per cent and group exposure, 50 per cent. This will be further relaxed for the 4000 MW power projects, each of which require an investment of about Rs 20,000 crore.

The power ministry had in March this year approached the finance ministry for relaxation in the cap on commercial banks' exposure to a single entity to 55 per cent of their net worth, to help fund the ultra mega power projects.

The ministry's proposal also included increasing the eligibility for external commercial borrowings (ECBs) and floating special bonds for the projects.

Sources close to the Reserve Bank said it had been looking into these proposals and would announce a relaxation in terms of exposure as well as ECBs soon.