With a view to fund solar power projects, bankers want the government to allow them to issue tax-free bonds, which work as stream for stable and long term resources.
Central Bank of India Chairman and managing Director S Sridhar today said banks should be allowed to float solar bonds with maturity of 10-15 years.
Solar power units, being infrastructure projects, have long gestation period and hence need funds with similar tenure. Banks mostly raise money through short- and medium term duration deposits. It gives rise to asset liability mismatch, often limiting their ability to fund bankable infrastructure projects.
Bank of India Executive Director M Narendra said there should be a mechanism to raise long term funds for solar projects. Banks face this challenge while lending to other infrastructure projects.
Bankers attending the seminar on funding solar power projects organised by Confederation of India Industry (CII) said this issue would be taken up with the Indian Bank’s Association (IBA). Some questions that needed to be addressed were — was the sector liquid, what was the cost of liquidity, what was the policy to make the sector bankable and steps to mitigate risks.
A senior executive from Bank of Baroda, while supporting the idea to float tax free bonds for funding solar power project, said besides asset liability mismatch, banks were wary of taking technology risks of rapid obsolescence.
Sridhar said banks were not averse to taking exposure to solar projects but needed more information to get clarity.
