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Wednesday, Oct 13, 2004

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SBI, LIC come together for funding infrastructure projects

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BIG PUSH FOR INFRASTRUCTURE LENDING: Mr A.K. Purwar (left), Chairman, SBI, with Mr S.B. Mathur, Chairman, LIC, at a press conference to announce the memorandum of understanding between the two organisations for infrastructure lending, held in Mumbai on Tuesday. — Paul Noronha

Mumbai , Oct.12

THE country's biggest banker and the largest insurer have joined hands to provide adequate long-term finance to infrastructure projects .

State Bank of India (SBI) and Life Insurance Corporation of India (LIC) on Tuesday signed an MoU, which is expected to remove the problem of asset-liability mismatch for the bank in financing long-term projects and provide LIC the opportunity to increase its exposure to the infrastructure sector.

Mr A.K. Purwar, Chairman, SBI, said that with this MoU, the bank's disbursement to infrastructure will double in the next one year.

"In the current fiscal, the bank has so far sanctioned loans worth Rs 6,000 crore to infrastructure projects. Loans amounting to Rs 2,500 crore have been disbursed of the targeted disbursements of Rs 7,000 crore this fiscal. We expect the disbursals to the power sector to form 10 per cent of our loan book," Mr Purwar told newspersons after signing the MoU.

SBI's total exposure to the infrastructure sector stands at about Rs 27,000 crore.

"This partnership will result in significant improvement in the infrastructure sector," said Mr Purwar.

While SBI will evaluate the projects and fund them for short term (up to five years), LIC will take the long-term risk. The bank will continue to monitor the project till the entire loan is repaid.

The agreement also provides for a switch of assets from one institution to another.

It is targeted at infrastructure projects both in the public and private sectors, covering power, telecom, ports, roads, airports, tourism, agri-processing and warehousing. The MoU will enable LIC towards meeting its regulatory requirement of investing 15 per cent of its funds in infrastructure and social sectors, said Mr S.B. Mathur, Chairman, LIC. "The money and the willingness to finance were always there but the projects were missing", he said.

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