LETTERS TO THE EDITOR Send your letters by email to bleditor@thehindu.co.in or by post to ‘Letters to the Editor’, The Hindu Business Line, Kasturi Buildings, 859-860, Anna Salai, Chennai 600002.

This refers to the editorial ‘RIP project finance’ (November 7). The entire financial sector is passing through a credibility crisis due to accumulation of massive volume of NPAs and frauds surfacing time and again. The uncertainty in terms of movement of interest rates and slowness of the economy have made people/institutions look at short-term goals instead of locking funds long term. This has led to a severe asset-liability mismatch, forcing banks to borrow short and invest in long term projects with gestation period ranging from 20 to 30 years.

The transition of developmental financial institutions (DFIs) like IDBI and ICICI into commercial banks has severely impacted infrastructure funding since the skill sets required for long- and short-term funding are totally different. Also, DFIs found commercial lending more profitable and less tedious is terms of skill sets required and follow-up measures vis-à-vis project finance. This had forced banks to adopt a “collateral approach” to project finance as they totally lacked risk-assessment skills required for financing long-term projects. Constraint in capital can also be cited as another reason for banks’ refusal to commit to infrastructure funding. Hence to solve the infrastructure financing need of the country, it is time the government set up DFIs exclusively to ensure seamless flow of funds into this sector.

Chennai

Though it is unfortunate that institutions are shutting the gate for project finance, the ground reality is that long-term lending comes with a lot of risks. The reasons for the failure of project financing are poor performance of corporates due to lack of demand, humongous NPAs that are created in the process and the Herculean effort needed in liquidating them, money laundering by unscrupulous borrowers, dearth of long term funding sources, and poor skills in appraising a project’s viability. The clear message is that commercial banks with short-term funds should not be compelled to enter project financing, as that is one of the main causes of liquidity pressure banks face.

Sivakasi

This refers to ‘Centre to open ₹25,000-crore window for stalled realty projects’ (November 7). The move is bewildering as most realty projects have come to a standstill owing to demonetisation, indicating that black money was the main source of funding. Second, the protests by home buyers point to non-compliance of the RERA Act, which was implemented mainly to protect the buyers from frauds and delays. Third, there are several real-estate projects which have not been completed for more than a decade, which must be probed. If the government is truly concerned about genuine home buyers, it must analyse the reasons for the slow progress of projects before offering huge amount of funds to developers.

Bengaluru

At a time when global e-commerce firms continue to be under the regulatory scanner, it is necessary to encourage only those products/services that are compliant with information security and financial norms. The authorities must act stringently against hackers and improve the rule-based/intelligent surveillance, to safeguard consumer interests. An advanced, tech-enabled mechanism coupled with sufficient user-awareness, can ensure integrity during operations. While the authorities ought to micro-monitor suspicious activities and illicit-content advertised over a host of online portals and social-media platforms, the restrictions should not affect the ease of communication, cost of transactions and pace of digitisation.

Recurring incidents of security violation and potential vulnerabilities posed by spyware/malware and ransomware can cause incalculable damage. Therefore, it is prudent to promote well-regulated alternatives and pre-validate the multi-featured applications before market launch and continually improve the techniques/algorithms used for authentication of underlying data.

New Delhi

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