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Road loans add to banks’ NPA woes
NEW DELHI: Bank loans of nearly Rs11,000 crore to private developers working in the road sector have turned into non-performing assets (NPA), a parliamentary panel
NEW DELHI: Bank loans of nearly Rs11,000 crore to private developers working in the road sector have turned into non-performing assets (NPA), a parliamentary panel said in a report.
A loan account is declared NPA where an interest or scheduled payment is overdue for more than 90 days.
This comes in the backdrop of the NDA government’s special thrust on expanding India’s highway network in the next five years.
The highways ministry plans to invest Rs5 lakh crore to expand the network to two lakh kms. The ministry’s budget for 2016-17 saw a 31% increase to Rs57,976 crore.
As on March 31, Rs10, 848 crore out of Rs74, 088 crore loan given by ten nationalised banks to for funding more than 400 projects has turned into NPA, the standing committee on transport, tourism and culture said in its report on “Infrastructure lending in road sector.”
The banks include State Bank of India, Bank of India, IDBI Bank and Punjab National Bank (see box).
The committee headed by Rajya Sabha member KD Singh tabled the report on August 10.
The report only mentions information given by some of the nationalised banks to the committee.
Road sector experts told HT that the quantum of loans given by both nationalised and private banks as well as NPAs is much higher than what has been mentioned in the report.
In many instances, developers started diverting money borrowed for the road project, the panel said citing reasons for the high NPA.
The panel found that the developers withdrew money “from the escrow account as soon as it is available and diverted to the mother company”.
“They (developers) lost interest in the projects as they had already sucked out the money that was required by them,” the report added.
The committee has asked the government to “thoroughly inquire into all the 77 projects which were languishing in 2014 to understand the quantum of money siphoned away by the unscrupulous contractors in connivance with various agencies of the government and financial institutions.”
Besides, many of the developers were small companies lacking enough funds to undertake such highway projects.
The committee also noted that projects were bidded out without “proper study” and in many cases the unrealistically high premium offered by developers for so called viable projects resulted in the “failure of the project itself.”
Pravesh Minocha, group managing director of infrastructure consulting firm Feedback Ventures said the high percentage of NPAs in the road sector is an open secret.
“It’s a story of very aggressive bids by developers to win projects, over zealousness on the part of banks to give loans, developers not having the required capacity and NHAI not doing due diligence. It’s a deadly cocktail that has resulted in the mess.”
Senior highway ministry officials were not available for comments. “There was an unholy collaboration between banks and concessionaires,” said Rajya Sabha MP Kiranmay Nanda, a member of the committee.
