In­dia Govt may ask RBI to con­sider roads as a pri­or­ity sec­tor

The Pak Banker - - COMPANIES/BOSS -

The In­dian govern­ment will soon ap­proach the Re­serve Bank of In­dia (RBI) Gov­er­nor Raghu­ram Ra­jan with a pro­posal to in­clude road projects un­der the pri­or­ity sec­tor list for lend­ing pur­poses and re­view the non-per­form­ing as­sets norms to re­vive Rs. 40,000-crore worth of high­way projects that have not taken off due to bu­reau­cratic de­lays and cost over­runs.

The Road Trans­port and High­ways Min­istry has de­cided to take up the pri­or­ity sec­tor route with the cen­tral bank, fol­low­ing a con­sul­ta­tion with the In­dian Banks' As­so­ci­a­tion ear­lier this month.

The Min­istry has agreed to sup­port bankers' sug­ges­tions on the is­sue and "is will­ing to take it up with RBI," ac­cord­ing to a doc­u­ment of the meet­ing re­viewed by The Hindu. A govern­ment of­fi­cial had said last week that it will hold a meet­ing with the RBI soon.

The banks pro­vide a cer­tain por­tion of 'pri­or­ity sec­tor' lend­ing in the form of small value loans to farm­ers for agri­cul­ture, mi­cro and small en­ter­prises, poor peo­ple for hous­ing, stu­dents for education and low in­come groups and weaker sec­tions. At present, 40 per cent of loans given by banks should go to pri­or­ity sec­tors de­fined by the RBI. Out of this, 18 per cent should go to­ward agri­cul­ture lend­ing.

"Con­sid­er­ing the im­por­tance of road sec­tor in sup­port­ing the eco­nomic growth and na­tion build­ing, it should be clas­si­fied as ' pri­or­ity sec­tor,'" In­dian Banks' As­so­ci­a­tion (IBA), the in­dus­try body of banks, sug­gested in a meet­ing held with Road Min­istry of­fi­cials on Jan­uary 4 this year. In a sep­a­rate move, the Union govern­ment may ask the RBI to ease non-per­form­ing as­set norms for bank loans to re­vive projects. It may ask the RBI to not clas­sify bank loans as NPAs if the pro­ject has failed to take off be­yond two years from its orig­i­nal date of com­mence­ment.

At present, bank loans, ex­tended for in­fra­struc­ture projects, be­come NPAs if the pro­ject has been de­layed for two years from its orig­i­nal sched­ule even for rea­sons be­yond the con­trol of pro­mot­ers such as land ac­qui­si­tion ap­provals. This will, how­ever, be done for road projects which are found vi­able af­ter as­sess­ment.

The govern­ment may also ask the RBI to al­low banks to in­fuse more funds into projects fac­ing cost over­runs due to de­lays. At present, the RBI guide­lines al­low banks to fund ad­di­tional in­ter­est dur­ing con­struc­tion of projects and other cost over­runs up to 10 per cent of the orig­i­nal pro­ject cost. The IBA has re­quested the govern­ment to in­crease the limit of 10 per cent to sup­port stalled projects.

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