The Hindu Business Line : IDBI Bank doubles infrastructure exposure

The growth story
The power industry has seen huge sanctions in view of many new projects.
Opening up of the telecom sector has a major impact.
Modernisation of roads, ports and airports through SPVs at brisk pace.

HYDEL POWER: A file photo of North Eastern Electric Power Corporation Ltd's Ranganadi Hydro Electric project which meets roughly 40 per cent of the demand of the region. - Ritu Raj Konwar

Mumbai , April 14

IDBI Bank, whose core strength has historically been project financing, has seen its exposure to the infrastructure sector doubling, year-on-year, in 2005-06.

While sanctions doubled, disbursements increased three-fold during the fiscal. For the fiscal 2005-06, the bank's outstanding to this sector is Rs 10,000 crore and disbursements amounted to around Rs 5,000 crore. This is double of 2004-05, when the outstanding was over Rs 5,000 crore and disbursements were Rs 1,500 crore, said Mr Jitender Balakrishnan, Deputy Managing Director, IDBI Bank.

Aided by foreign direct investment and regulatory reforms, the infrastructure sector in India has seen huge growth in terms of investment. For banks, this has led to an increase in their exposure to this sector. Though the loans are typically of longer tenure and therefore, risky to some extent, most lenders see huge growth in this sector.

Among the various segments in the infrastructure sector, the power industry has seen huge sanctions due to the large number of projects that have come up in the last couple of years.

Opening up of the telecom sector too has had a major impact, as it requires huge amounts of money. "This sector is growing rapidly as subscriber levels are going up by two to three million a month," Mr Balakrishnan said.

Huge funds are also being put into the modernisation of roads, ports and airports through special purpose vehicles.

The bank is part of the modernisation project of the Mumbai and Hyderabad airports, with GVK. It has also lent to the Gangavaram port modernisation in two tranches of Rs 35 crore and Rs 100 crore.

Specific risks

Infrastructure lending is typically of longer tenure and therefore has certain risks, Mr Balakrishnan said. However, he said, "We look at the project and the parentage of the project. Many of these projects are by the same companies with whom we already have a relationship. So, they get a fairly good rating."

Among other sectors, the bank has a fairly large exposure to the textile industry, next to steel and infrastructure. "We have a fairly large portfolio in cotton and synthetic yarns, spinning and weaving units. A large number of textile units which were not competitive have now turned the corner. Many of them have changed their technology, restructured their balance sheets and rationalised manpower. They are also attracting foreign investors," Mr Balakrishnan said.

Till recently, IDBI also was the only agency for disbursing loans under the Textile Upgradation Fund.

As on December 31, 2005, the bank's outstanding to the textile sector was Rs 4,300.37 crore. This consists of Rs 951.52 crore to artificial fibbers, Rs 570.82 crore to textile (other category) and Rs 2,778.03 crore to cotton textiles.

More Stories on : Credit Market | Infrastructure

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
IL&FS to raise $60 m

Forex reserves spurt $2.5 b for third week

LIC sells more traditional policies than ULIPs

IDBI Bank doubles infrastructure exposure