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Our Bureau

Bank gets queries for Rs 55,000-cr funding

JOINT LENDING: Mr T.S. Vijayan (left), Chairman, LIC, and Mr V.P. Shetty, Chairman & Managing Director, IDBI, addressing a press conference in Mumbai on Thursday. - Shashi Ashiwal

Mumbai , Dec. 21

The rise in demand for credit from the infrastructure sector has led to several banks joining up for infrastructure financing with the latest being IDBI Ltd, which today signed an agreement with LIC for joint and take-out financing.

According to Mr V.P. Shetty, Chairman and Managing Director, IDBI Ltd, the bank has received enquires for infrastructure projects worth Rs 55,000 crore. Of this, about Rs 15,000 crore was sanctioned. The average duration of these projects is between 10 and 20 years and is spread over power, ports and airports and non-infrastructure segments such as textile industries.

Under the agreement, LIC will get the first chance to reject any long-term project that IDBI takes up, Mr Shetty said.

IDBI could finance the first five years and LIC the remaining 10 years for a 15-year project. Or, the repayment could be structured so that in the first five years, 70 per cent of IDBI's loan and 30 per cent of LIC's loan are repaid and vice-versa in the remaining period, explained a senior IDBI official.

IDBI is one of the lenders in several big-ticket infrastructure projects such as the Rs 5,000-crore Mumbai economic zone. It is also the lead arranger for the Mumbai airport upgradation project, which has a debt component of Rs 5,200 crore.

Some of the projects in the pipeline are the Metro Rail project and the Trans Harbour project, said the official.

LIC has, on a cumulative basis, pumped over Rs 3,67,000 crore in infrastructure development in the current year, while in the last financial year it was Rs 13,832 crore.

Mr D.K. Mehrotra, MD, LIC, said in the current year, the corporation had invested Rs 6,034 crore in housing, power and highway construction.

No hike

IDBI has no plans to hike deposit or lending rates, said Mr Shetty. However, he admitted to overall cost of funds going up. Credit has been growing at an annual average of 30 per cent for the past three years, but there has been no adequate deposit growth. Until now most banks had excess SLR, due to which they were comfortable. However, now SLR for most banks is in the 26-27 per cent range and this would put pressure on liquidity, he explained.

"As the year comes to a close, most banks will actively mobilise deposits and rates may go up. But this is more of a balance sheet exercise and not linked to a rate hike," Mr Shetty added.

Mr T.S. Vijayan, Chairman, LIC, said the corporation is planning to introduce health insurance products early next year with non-traditional features. At the end of October, 2006, the corporation raked in Rs 28,906 crore of new business premium.

More Stories on : Credit Market | Infrastructure | Life Insurance

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