February 17, 2016 4:18:04 am
Even as the Centre has set its focus on developing infrastructure in its bid to push growth in the economy, on the ground, action seems to be missing. While credit off-take for the overall infrastructure sector continues to remain on a declining trend, the road sector has emerged as the only silver lining as it has witnessed a gradual pick-up in credit growth over the last six months.
RBI’s monthly credit growth data since June 2013 shows that the y-o-y credit growth for the sector has come down sharply – from a high of 19.1 per cent in June 2013 to 8.4 per cent in December 2015. It had even hit a low of 8.2 per cent in the month of August 2015.
While traditionally, the power sector is the biggest drawer of credit within this space, it has seen the sharpest decline in credit growth during the period in review — a fall from 29.8 per cent in June 2013 to 10 per cent in December 2015.
The road sector has been the only bright spot over the last six months. While the y-o-y credit growth had slowed down from 21.5 per cent in June 2013 to 3.4 per cent in June 2015, it has come up since then. Over the last six months the credit growth has picked up and for the month of December it stood at 7.9 per cent, a one-year high. However, it is still short of growth numbers seen in 2013.
A large portion of this decline in credit growth is also being linked to the high number of stalled projects in the infrastructure space and their contribution to the rising non-performing assets (NPAs) of PSBs. Experts say that while stalled projects are reducing the ability of infrastructure companies to take credit, banks are also practicing caution while lending to them as a result of a rise in NPAs within the sector. “NPAs linked to the infrastructure sector remains high and accounts for over 50 per cent of the NPA in the banking system. The borrowing ability of firms will improve if the stalled projects are revived. It will also encourage banks to lend more,” said a senior official with a PSB.
However, the ray of hope comes from the fact that the road sector has witnessed a pick-up in activity in revival of stalled projects over the last few months. In fact, in FY16 till November, NHAI has awarded 873 km of projects worth Rs 11,900 crore on a build, operate, transfer (BOT-Toll) basis and 1,776 km of projects worth Rs 27,234 crore under the engineering, procurement, construction (EPC) model. The Centre has aimed at awarding about 2,000 km of highway development projects on a PPP basis out of its total target of 10,000 km for the current financial year.
Experts say that the credit demand is growing for the road sector as a result of the awarding of new projects and feel that it will grow up further in the coming months as action picks up further on ground. However, this alone can’t lift the credit off-take for them. Some say that banks have to be comfortable lending to the players within road and power sector as many of the players are stressed with high levels of NPAs.
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