Core sector to get soft loans

The government decided to fund infrastructure projects worth around Rs 50,000 crore at concessional interest rates. It also set up a Rs 10,000 crore fund for providing cheaper funds to small and medium enterprises (SMEs) ahead of the general elections.

Under the scheme planned for the infrastructure sector, credit for both term loans and working capital to projects in power generation, sea ports, airports, roads, tourism, telecommunication and urban infrastructure would be provided at 200 basis points below the prime lending rate (PLR) over the next three years, Finance Minister Jaswant Singh said.

"A consortium of banks and financial institutions, under lead institutions, will appraise major projects, and after ascertaining their economic viability, ensure that credit for both term loans and working capital is provided speedily at higher competitive rates of interest," he said.

An aggregate additional investment of Rs 50,000 crore would be catalysed over the next three years in infrastructure and manufacturing projects, Singh said.

A consortium of IDBI, IDFC, LIC, ICICI Bank and SBI had been designated for policy, procedural and financial closure of investment to the tune of Rs 50,000 crore over the next three years, he said.

The government is also planning to provide assistance for the setting up the fund, including financial guarantees, appropriate risk mitigation measures, and other financial resources to ensure the availability of funds at reasonable rates of interest.

With regard to the fund being set up for providing cheaper credit to small and medium enterprises, Singh said the Small Industries Development Bank of India (SIDBI) would structure a Rs 10,000 crore over the next two years.

"In respect of small and medium enterprises, two major problems that have been identified relate to inadequacy of financial resources at competitive rates and lack of SIDBI-coverage for some of the medium-sized enterprises," he said.

The concessional credit for the SSIs is aimed at garnering support from the BJP's traditional vote bank. Concessional resources already available with SIDBI, by virtue of deposits made by the foreign banks in lieu of priority sector lending, will be initially used for this purpose.

The interest on loans advanced from enterprises will be 200 basis points below the PLR, he said adding the fund will be operational within 4 weeks.

Fillip for infrastructure

• Banks/FIs to catalyse investments of Rs 50,000 crore in the core sectors
• Dedicated fund to be serviced by IDBI, IDFC, SBI, LIC and ICICI Bank
• Funds to be provided at 2% below PLR
• A new Rs 10,000 crore fund for providing cheaper credit to SMEs
• SIDBI to operationalise the fund in 4 weeks.