Bankers voice concern about financing large infra projects

There could be some concern about financing large infrastructure projects as the Reserve Bank of India's (RBI's) new framework, related to 'large exposures', proposes to reduce bank exposure to large corporate entities.

"There could be some concern for financing large infrastructure projects particularly greenfield projects. New framework from the RBI suggests that from April 2019, for any entities with borrowing of Rs10, 000 crore from the banking industry, banks can only finance 50 per cent of the additional financing requirements. The rest (of requirements) has to be raised from either equity or market borrowing," said State Bank of India's managing director (Compliance & Risk) P K Gupta.

 

In a discussion with the RBI on Friday, bankers suggested that India's apex bank should look at it, he said on the sidelines of a Banking Summit organised by Indian Chamber of Commerce and Industry.

"According to the new regulations, for large exposures of above Rs 25,000 crore, banks will only finance 50 per cent of the additional financing requirements in 2017-18," Gupta said. The rest may be raised from the capital market or equity. The new regulations also suggest, to bring down the limit to Rs 15,000 crore in 2018-19.

The objective of the RBI is that banking sector's exposure to large borrowers should come down and corporate entities should go to markets to raise more funds so that there will be better price discovery in the market, he added.