Banks, wary of providing credit to infrastructure projects due to their long gestation period, have started warming up to the capital-intensive sector, thanks to some support.
India Infrastructure Finance Company (IIFCL) has sanctioned Rs 1,600 crore as to government banks for several projects in the last one year. IIFCL was set up to facilitate easy credit for projects with long gestation period.
Most government banks have increased their lending to them by 36.8% in 2010-11. The State Bank of India and its subsidiaries have registered a 70.4% growth in lending to the cash intense infrastructure sector.
IIFCL had introduced the takeout finance scheme in 2009 to address the constraints relating to exposure norms and asset liability mismatch faced by the banks. Under this scheme, the loan amount is taken out from the books of the banks within the fixed period and transferred to another bank.
“Infrastructure projects typically are long term loans and banks were earlier not keen to lend to them to ensure there was no asset liability mismatch but the takeout financing scheme has eased credit flow into the sector,” a senior government official, on condition of anonymity told HT.
The government has envisaged a total investment of Rs 20,56,150 crore in infrastructure during 2007-12.