New products vital to fund infra projects: SBI chief

Curently most infra projects are financed with 8-10 year term loans while assets will have useful life of 25 years and beyond

State Bank of India Chairperson Arundhati Bhattacharya on Saturday said there was a need to design new products to ensure funding for infrastructure projects had proper arrangements for repayments or refinance. Currently, most infrastructure projects are financed with eight-10 year term loans, while the assets have a life of at least 25 years. This led to front-loading of repayments, Bhattacharya said. There was a need for an arrangement through which loans to infrastructure projects could be refinanced every five years, she added.

According to the Reserve Bank of India (RBI), banks have been substantially financing infrastructure projects, despite the inadequate commercialisation of projects due to regulatory, political and legal constraints and the absence or insufficiency of user charges in many sectors. This exposure to infrastructure has come with a fair share of pain---of late, gross non-performing assets (GNPAs) and restructured assets in this segment have increased substantially.

According to RBI data, GNPAs and restructured standard advances for the infrastructure sector, as a percentage of total advances to the sector, increased from 4.66 per cent in March 2009 to 17.43 per cent as of March-end 2013.