The Reserve Bank of India (RBI) has asked banks to develop skill sets to make lending to the infrastructure sector more effective. The central bank also called for timely sanctions, especially to power projects — a concern that was earlier raised by power ministry officials in interactions with RBI officials.
During the post-policy meeting with bankers and top RBI officials on Tuesday, the regulator discussed concerns in the power sector over availability of finance from banks. RBI Deputy Governor Shyamala Gopinath was present during the interaction with bankers.
Power sector players, who are of the view that some banks have exhausted their group and single-entity exposure limits, had requested some relaxation. But the regulator is unlikely to make any further relaxation for infrastructure projects.
“The power ministry has made some points (in the interaction with RBI). The central bank’s officials today brought this to our notice and asked whether we could incorporate this,” a banker who was present at the meeting said.
“The power ministry wants some skill development to take place in banks. Some norms could be relaxed. All banks are not into project financing, only some banks are. Skill levels of banks may have to improve substantially so that sanctions can take place on time,” the banker added. The RBI, in its annual policy for 2010-11, announced measures to boost bank-lending to the infrastructure sector. The central bank allowed banks to classify their investment in non-statutory liquidity ratio (SLR) bonds issued by infrastructure companies, which have a minimum residual maturity of seven years, in the held-to-maturity (HTM) category.
Furthermore, RBI has relaxed the 25 per cent ceiling on classifying bonds in the held-to-maturity (HTM) category if the investment is in infrastructure bonds issued by companies. Bonds that are in the HTM category do not have to be marked-to-market. At the same time, the central bank also expressed its growing concern on asset-liability mismatches on the banks’ books, arising from lending to core sector projects.
The asset-liability gap is widening because deposit accretion by banks are mostly short term, between one and three years, while lending to core sector projects are of 12-15 years’ duration.
During the post-policy meeting, central bank officials also noted the progress made by banks for implementation of International Financial Reporting Standard (IFRS), advanced approach of Basel-II norms and financial inclusion, bankers said.
