Banks will have to ‘abort’ lending to infrastructure projects, warns SBI

Source: The Hitavada      Date: 01 Sep 2018 11:36:27




THE nation’s largest lender State Bank on Friday said banks will have to “abort” lending to infrastructure projects, especially to the power sector, because of the harrowing experience of the past decade as most such loans have turned sour. The power sector loans are facing a slew of problems due to a changes in non-performing assets recognition after the February 12 RBI circular, which was upheld by the Allahabad High Court last week.

Following the end of the RBI deadline on August 27, as many as 30 power projects with a cumulative exposure of Rs 1.7 trillion are now facing bankruptcy proceedings. Banks have under a fortnight to resolve them, else will have to be sent to NCLTs. “Somehow, the kind of problems which all banks are now faced with, may be they will have to abort their financing to the infra projects,” SBI MD, Dinesh Kumar Khara told reporters on sidelines of an event. When asked if the infra sector funding, critical for economic progress, is “untouchable for banks now,” he singled out the power sector saying, “nobody wants to touch that.”

Making it clear that banks are open to lending to all the sectors till the risks are hedged properly, he said there are problems relating to fuel supply pacts and power purchase agreements. Khara said bankers are open to funding road projects, and credited to NHAI which structures these projects.