MORTH weighs impact of RBI’S infra loan rules
The Union road ministry is evaluating the central bank’s draft guidelines mandating higher provisioning on loans for infrastructure projects, and may raise the issue with the finance ministry to ensure the new rules don’t derail its grand highway-building plans, two persons aware of the development said.
According to them, the ministry of road transport and highways(morth)hasreceivedseveralrepresentationsfromindus try executives, urging it to make a case for the infrastructure sector with the Reserve Bank of India and the finance ministry, as the stiff provisioning norms can potentially dry up bank finance for infrastructure projects and make loans costlier.
The immediate concern for the sector is whether the changes would derail MORTH plan to revive BOT (build operate transfer) projects for highways, where private investment is expected to come after a long interval. Already, MORTH has identified 53 BOT (toll) projects for a length of 5,200 km worth ₹2.1 trillion for award in coming year, and bids for 7 projects with a length of 387 km worth ₹27,000 crore have been invited.
According to one of the two personsquotedabove, MORTH is getting suggestions from the industry that would help it present a case for the sector and seek changes in the draft regulations before the end of the consultative process on the draft by 15 June. “Not only banks, but the viewsofthesectorthatwouldbe most impacted by RBI’S revised guidelines would have to be heard before finalising any changesinprovisioningnorms,” the person said.
Query sent to the ministry of road transport and highways remained unanswered till press time.
“The RBI draft regulations would be a big negative for the roads and highways sectorandcoulddryupinvestments intheabsenceofrequisitefunding from financial institutions.
We plan to put our request for a review or withdrawal of the changed norms of classification ofassetsintheinfrastructuresector requiring higher provisioning during construction stage withthemorthsothattheconcerns get heard and addressed during the consultative process for finalizing the draft regulations. Our concern is that BOT projects would take a heavy toll asprivateinvestmentwouldnot flow if funds become expensive or banks become reluctant to provide credit to the industry,” saidp.c.grover,directorgeneral of National Highways Builders Federation, a lobby group.
MORTH may raise the issue with the finance ministry to ensure the new rules don’t derail its grand highwaybuilding plans