Govt set to nudge banks: Loosen purse strings for stalled projects | business | Hindustan Times
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Govt set to nudge banks: Loosen purse strings for stalled projects

business Updated: Apr 20, 2015 00:24 IST
HT Correspondent

The government is looking at ways to convince reluctant banks — hit by mounting bad loans — to lend more to the cash-starved infrastructure sector and kick-start roads, ports and power projects, critical to create jobs and catalyse growth across farms and factories.

Next week, the financial services secretary Hasmukh Adhia will meet top Reserve Bank officials and state-owned bank chiefs to undertake a case-by-case review of several stalled road, power, steel and shipping projects.

“We will review the situation and see what further steps can be taken to improve the situation,” Adhia told HT.

Officials from several ministries across road, power and others will attend the meeting that will be held in the RBI’s Mumbai headquarters on April 28.

“The objective of this meeting is to understand the problems faced by the project promoters and the banks in retrieving them and to find-out a solution to such problems,” a finance ministry statement said. “This meeting would help the department to crystalise the actions required by banks, the finance ministry and other concerned central ministries as well as support required from RBI.”

India would require about $1 trillion (Rs 62 lakh crore) — half the value of the national GDP — over the next five years to overhaul its collapsing infrastructure.

The Narendra Modi-led government aims to build 30 km of highways every day, thrice more than the previous UPA government’s target, which it had failed to achieve.

According to the road ministry, an additional Rs 1.76 lakh crore — nearly six times the annual budget of rural job guarantee scheme NREGA — will be required in the next three years to build 15,000 kms of highways.

The road and other infrastructure projects can spur economic activity, boost construction and create jobs.

According to credit rating and research firm Crisil, the construction sector is the most labour-dependent among all non-agricultural sectors, requiring more than 12 people to produce Rs 10 lakh of real output.

In the last few years, non-performing assets (NPAs), or loans that have turned bad of banks, particularly those in the public sector, have been rising mainly due to stalled projects and sluggish domestic growth.

NPAs of banks topped Rs 3 lakh crore as on December 2014, of which Rs 2.62 lakh crore belonged to the nationalised banks alone, Jayant Sinha, minister of state for finance, said in the Lok Sabha recently. This had made banks reluctant to lend to projects that are prone to delays because of variety of reasons ranging from environmental concerns to procedural bottlenecks at the states.