SBI, LIC to jointly fund core projects

Two giants of the Indian financial landscape, State Bank of India (SBI) and the Life Insurance Corporation (LIC), have entered into an agreement to jointly finance big-ticket infrastructure projects in the country.

SBI aims at doubling its annual infrastructure disbursements through this tie up, said the bank's chairman, A K Purwar said today.

LIC, with an exposure of Rs 42,000 crore to infrastructure and SBI, with a exposure of Rs 26,000 crore to the sector. today signed a memorandum of understanding.

Through it the two institutions will jointly fund power, telecom, roads, ports, airports, tourism, agri-processing and warehousing through this arrangement.

"Through this arrangement we will be able meet our statutory requirement of funding infrastructure. We had a shortfall of Rs 4,000 crore last fiscal," said S B Mathur, chairman, LIC.

As per statutory requirements all insurance companies are required to disburse 15 per cent of new accretion of funds into infrastructure.

LIC has disbursed Rs 3,500 crore towards infrastructure this fiscal and the statutory requirement for the year is Rs 10,500 crore.

"The fund requirements for the infrastructure sector are mind boggling and it is next to impossible to tackle it individually. Besides SBI cannot fund long term loans beyond 8-10 years due to the asset-liability mismatch, while LIC can easily fund up to 20 year loans," explained Purwar.

SBI has sanctioned Rs 6,000 crore towards infrastructure this year and has disbursed Rs 2,000 crore so far.

The bank aims to double the figure in the coming year. The bank is optimistic particularly on the power sector and aims to increase its exposure to the power sector to over 10 per cent.

Currently SBI's total exposure to infrastructure works out to at Rs 26,000 crore or 10 per cent of its total assets.