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Both banks to facilitate jt identification and underwriting of project finance

(From right) MR M. BALACHANDRAN, Chairman & Managing Director, Bank of India, Mr M.V. Nair, Chairman & Managing Director, Union Bank of India, and Dr Rajiv Lall, Managing Director and CEO, IDFC Ltd, at a press conference in Mumbai on Wednesday. — Shashi Ashiwal

Mumbai , Nov. 8

Bank of India and Union Bank on Wednesday tied up with infrastructure financial services provider Infrastructure Development Finance Company Ltd (IDFC) for loan syndication. The two banks will also work together in international operations, to offer cash management services and in training.

Under the arrangement with IDFC, both banks will facilitate joint identification, marketing, appraisal and underwriting of project finance. This will provide a single point contact for the borrowers.

The two banks have set a target of Rs 11,500 crore for projects in the next 4-5 months and hope to handle 60 projects worth Rs 45,000 crore in the next one year, said Mr M.V. Nair, Chairman and Managing Director, Union Bank of India.

Currently, Union Bank of India has an exposure of Rs 5,500 crore in infrastructure and Bank of India has an exposure of Rs 5,000 crore.

"We would together take on projects in infrastructure and in other areas," said Mr M. Balachandran, Chairman and Managing Director, Bank of India. Other areas where the banks would collaborate include, pharma, auto ancillary, power, diamond and iron and steel.

As Union Bank of India has no overseas operations as of now; Bank of India will be the preferred bank for services such as trade finance and buyers' credit.

By sharing their Core Banking platform they would also offer cash management services to mid-corporates, SMES and individuals.

Dr Rajiv Lall, Managing Director and CEO, IDFC Ltd, said the scope for loan syndication is on the rise, because mega infrastructure projects are coming up and often a single lender cannot meet the capital requirements. According to projections, India would spend $320 billion in the next five years on infrastructure, while its share in the GDP would rise from 4.5 per cent to 8 per cent annually. Similarly, it is estimated that infrastructure financing would increase from 10 per cent to almost 30 per cent of incremental bank credit, he said.

Deposit mobilisation

Asked about the Finance Minister's recent instruction to public sector banks to increase deposit mobilisation, Mr Balachandran said, "Deposit mobilisation has to be intensified. We will identify new deposit products. We will achieve the targets that have already been set."

When asked if banks are planning to raise deposit rates, Mr Nair said, "Price is not the only factor. We can add value to the deposit products. Given the expected economic growth, there is need for enhanced resources. As there is not much headroom available in securities, deposit mobilisation needs to be enhanced."

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