MUMBAI, July 31: Leading financial institutions, which are struggling to boost the sluggish credit offtake, are focussing more on short-term lending and infrastructure projects, ignoring the needs of other mega projects.ICICI is getting into the short-term lending in a big way by introducing a short-term prime lending rate of 12.5 per cent per annum. This will also help the institution to avoid defaults and build-up of non-performing assets. IDBI, on the other hand, is going for infrastructure projects - especially power and telecom - and recently cleared term loans of Rs 2,000 crore for such projects.However, institutional sources admitted that the credit disbursals to other mega projects - other than infrastructure areas - have not picked up. ``Institutions are not showing much interest in financing steel, cement and paper projects in spite of the fact that several mega projects are in various stages of implementation. As the primary market is in bad shape, there is no way these companies can raise funds to complete their ongoing projects,'' said a corporate source.Around a dozen steel projects, including that of Tisco, Jindal Vijayanagar, Ispat and Malavika Steel are facing delays in getting adequate finance. Similarly, at least two business groups - Century Textiles of the Birla group and Ballarpur Industries of the Thapar group - have deferred their plans to set up mega paper projects. As many corporates have defaulted on their principal/interest repayments, institutions are extremely careful in financing mega projects. ICICI, for example, has reported a higher NPA level of 7.8 per cent last week as against 6.8 per cent as on March 31, 1997.However, a senior official with an institution claimed that implementation of many mega projects has slowed down due to the demand recession and excess capacity in many sectors like steel and cement. ``We're concentrating on infrastructure projects,'' he said, adding, ``good companies are now opting for private placement of debt instruments and commercial paper which work out cheaper than other funding sources.''Now the situation is something like this: flush with funds institutions want to boost the credit offtake, but they don't want to put money in sectors which are facing recession. Even though institutions relaxed debt-equity norms, the move has not helped many corporates which are not in a position to raise money from the primary market as well. Institutions which were earlier following a 1.5:1 debt-equity ratio relaxed it to 2:1 in several cases. This followed the drop in the growth rate of sanctions by institutions last year.Although institutions also brought down PLR from 16.5 per cent to 14.5 per cent, many corporates which are implementing greefield/expansion projects have not been able to capitalise on it. As a result, implementation of many mega projects has been stalled. Nocil, belonging to the Arvind Mafatlal group, was unable to undertake the expansion of its petrochemical unit as it could not tie up for term loans and raise public money.According to an estimate by the Centre for Monitoring Indian Economy (CMIE), projects worth Rs 471,522 crore are in various stages of implementation. But it is to be seen how many of them will complete their projects without incurring time and cost overrun. One reason for the current situation may be high interest rates (even though PLR was brought down from 16.5 % to 14.5 %) and the reluctance on the part of FIs.It is not a cheering situation. Poor resource mobilisation is increasingly affecting the country's industrial growth especially new projects. As per Prime Database, public issues of 1992-93 had helped finance industrial projects worth Rs 15,923 crore which had risen to Rs 38,182 crore in 1994-95.
