Banks stay cautious on infra lending

Mumbai: With RBI giving no relaxation to its February 12 framework on resolution of stressed assets, banks are likely to become more cautious and risk-averse to long-term funding, especially to the infrastructure sector, say lenders.

On February 12, RBI  had come out with revised framework for resolution of stressed assets. The new set of rules aim at quick reporting of defaults, coming out with resolution plans for defaulting companies and time-bound referrals of defaulting firms to the NCLT.

Owing to certain stringent criterion in the new framework, which includes one-day reporting of defaults, lenders have asked for some leniency but the apex bank has not granted any relaxation to its February 12 circular.

“The RBI is very clear that they are not going to give any relaxation (on the February 12 framework). Now, I think banks will become very cautious and risk averse, particularly on the long-term funding in sectors such as power, road and ports,” said a senior banker.

Bankers said most of the restructuring happens in long term projects in the infrastructure sectors.

For nation building, funding is required for these sectors but risks are very high in these projects as there are things which are much beyond the capabilities of the promoters, and hence banks will be very conservative, said another banker from a large state-run bank.