The Hindu Business Line : Jump in film production costs could hit bank funding

Chennai, Nov. 19 The cost of producing films has dramatically increased in the last one and half years. This could affect bank funding for film industry, says Mr N. Kumaraswamy, Field General Manager, UCO Bank.

Mr Kumaraswamy was speaking on “Film Financing: Options, Avenues and Challenges’ at a Media and Entertainment Business Conclave organised here by the Federation of Indian Chambers of Commerce and Industry (FICCI). He said his bank had written to the Reserve Bank of India to allow banks to raise their exposure to individual film projects. Currently, the RBI allows Rs 5 crore exposure to a movie.

Mr Kumaraswamy noted that the RBI had always wanted more institutional funds to flow into the film industry, so that the industry’s dependence on illegal money, and hence its connection with the underworld, could end.

“Of all the financial institutions, we (UCO Bank) are the most exposed,” he said, adding that the bank’s loans to the film sector are about Rs 400 crore. Mr Kumaraswamy said that UCO Bank had thus far funded 67 movies.

“There has been no bad debt,” he said, drawing a round of applause from the audience. He observed that even in cases where the films failed, the producers made good their dues to the bank.

He also said that the bank, following the example of IDBI Bank, had set up a committee comprising eminent film personalities to vet loan applications from the film industry.

Mr Kumaraswamy pointed out that the film industry was “huge” but also the “most unorganised”.

Mr R. Ravichander, Group Executive Vice-President, YES Bank, noted that today multiple avenues for raising funds are available to the film industry, such as equity from venture funds or through IPO, FCCB, co-production with overseas companies and, lately, the ‘film funds’.

He gave examples of film companies that had raised funds through these avenues.

He stressed that the film industry ought to look at monetising all sources of revenues, such as television, cable and DVD rights. (This resonates with a research report of FICCI-Ernst & Young, which notes that South Indian film producers bundle these rights along with theatre rights.)

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