He also indicated that the RBI deadline March 2017 for banks to clean up stressed assets from their balance sheets would not be extended.
Structuring of the infrastructure funding has to be very-very correct, because they have long gestation projects, have their specialty and these aspects must be taken into consideration while structuring the financing for these entities, he said.
He added that these projects need to have a proper mix of equity and loan funding and the timelines for completion of projects need to be assessed realistically upfront so that the date of commencement of commercial operations (DCCO) is not artificially fixed without regard to the normal time taken for executing such projects.
We do understand there is stress in this sector and we are trying to find solutions without undermining the larger prudence which is very important when we look at the balance-sheets of banks, added Vishwanathan.
He informed that the RBI has provided additional toolkits to banks to deal with the stressed assets. We have added the construction sector as an industry in which some of these toolkits can be applied in respect of accounts where they have crystallised outstandings due to invocation of bank guarantees.
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He added that the toolkits are essentially intended to allow banks to structure the loans in such a way that the asset quality is maintained.
He said that the government has also come out with a scheme to provide 75 per cent against the arbitration cases, against bank guarantees and those were the kind of steps which are very important to resurrect the industry.
Let us be very clear, when you want to deal with stressed assets, identifying the problem upfront is very-very important and all the banks taking joint action to deal with the problem is also very critical, said Vishwanathan.
Highlighting that India needs about Rs 31 trillion to be spent on infrastructure development over the next five years with 70 per cent of funds needed for power, roads and urban infrastructure, he said that it is essential that stakeholders take the right steps to participate in this move and also make a decent return from this opportunity.
He said that boosting infrastructure finance will require broadening of the potential group of investors and tapping of vast financial sources of capital market. This in-turn necessitates a broader mix of financial instruments.
Adding that both infrastructure funds and bonds have great potential, he said that the better and more widespread securitisation of bank loans seems desirable to diversify risks. It may also assist the development of a transparent capital market instruments.
He further said that for emerging markets, financial market development, trusted legal framework and the development of a long-term investor base are very important.
Hopefully banks will move towards use of credit enhancement instruments so that there is more excess of the bond market by the corporates which are executing infrastructure projects, said the RBI deputy governor.
He also said that the apex bank was looking at many of the several recommendations made by H.R. Khan Committee with regard to the corporate bond market.
Vishwanathan said that there is a huge need to move towards green bonds because there is lot of potential in harnessing green bonds. There are lot of people wanting to invest in those kind of projects and given India's commitment to Paris Climate Accord, this becomes all the more necessary.
We must be able to find methodologies that could properly evaluate the prevention or avoidance or reduction of emissions that projects funded by these bonds will result in, he added.
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