The Hindu Business Line : Core sector funding: Banks await details

Mumbai, July 7 Welcoming the announcements in the Union Budget, with regard to infrastructure sector lending — takeout financing and refinance through the India Infrastructure Finance Company Ltd (IIFCL) — banks officials said they would wait for more details.

The measures are expected to address the issue of long-term resources and asset-liability mismatches faced by banks. They may also prompt banks to lend more to the sector.

Mr B.A. Prabhakar, Executive Director, Bank of India, said that as takeout financing had not picked up when it was introduced earlier, this time around, banks would wait for more details. But long-term funding was a problem, he admitted. “Banks have huge asset-liability mismatches. Takeout financing is something banks have been asking for,” he said.

Long-term funding

According to a senior official from Union Bank of India, infrastructure companies require long-term funding of up to 10-15 years. As banks usually raise deposits of five to 10 years, there could be problems of asset-liability mismatches.

Therefore, the measures related to takeout financing are helpful for banks.

In order to ensure that infrastructure projects do not face financing difficulties arising from the current downturn, IIFCL will refinance 60 per cent of commercial bank loans for public private partnerships projects in critical sectors over the next one and half year.

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