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| RBI no to sops for infra funding |
| BS Reporter / Mumbai Sep 09, 2010, 00:20 IST |
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Banks had sought easier exposure norms and priority sector status for such lending.
 The Reserve Bank of India (RBI) has turned down banks’ plea for sops such as relaxation of exposure norms and priority sector status for lending to infrastructure projects.
“If you look at the concentration risk and the asset-liability mismatches, any further relaxation will be imprudent,” RBI Governor Usha Thorat said at a banking seminar organised by the Indian Banks’ Association.
In February, RBI said exposure of banks to infrastructure finance companies had been enhanced up to 20 per cent of their capital funds.
She conveyed RBI’s disapproval of the plea for giving priority sector lending (PSL) status for funding to infrastructure projects. There was a specific purpose for PSL, to provide credit to areas like farming and micro and small enterprises. Banks found it challenging to meet the condition that 40 per cent credit go to the priority sector, Thorat added.
Thorat said the headroom for government financing for infrastructure was quite limited in India and so there was a need to reach out to banks, financial institutions and capital markets. India needs $500 billion for infrastructure in the five years to 2012.
The government and the Planning Commission had earlier indicated that this could double to $1 trillion during 2012-2017. Indian lenders expect loan growth to pick up in the second half of this financial year, driven by demand from the infrastructure sector.
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