Bankers demand special facilities for core funding

The primary constraints for banks in financing infrastructure arises from their funding structure and applicable liquidity ratios. Bank resources are mainly in the form of deposits,which are typically of maturities up to three years. On the other hand,infrastructure sector requires long-term financing for a period extending beyond 15 years. Apart from asset-liability mismatch,interest rate risk and pricing are also key issues,IBA members said.

S Sridhar,CMD,Central Bank of India,said,“In absence of any relevant mechanism,we have to reset our interest rates for infra lending on regular basis,which was not the fair way of lending to the sector. Also,we are looking at raising money through debts in foreign currency,that were available at comparatively cheaper cost post global slump.”

SK Goel,CMD,UCO Bank,said the banks are unable to mobilize deposits for infra lending. “Hence we want to raise long-term bonds so as to avoid the ALM that we are faced with currently. The nature of the bond can either be cumulative or regular interest one. We have opened a syndicate cell with our bank so as to facilitate big ticket infra loans. Currently we are having an exposure to the tune of Rs 8,000 crore to the sector which we plan to raise to Rs 10,000 crore by the end of the fiscal. Hence,we want to recruit experts in scale IV and V for the purpose.’’

M Narendra,executive director,Bank of India said that infra lending would comprise 15% of his bank’s total credit,as against the existing 10% level. “We want to adopt the route of takeout financing and securitization & assignment of debt to achieve this goal.’’

The RBI has permitted banks to go for infra bonds to the extent of infra lending with a maturity period going beyond five years.