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Journalism of Courage
The Reserve Bank of India has liberalised the norms governing bank lending to companies in special economic zones (SEZs). With the RBI keeping some activities in SEZs outside the purview of commercial real estate (CRE),the risk weight on such lending will also come down,leading to lower interest rates. Exposures towards acquisition of units in SEZ were earlier specifically included in the definition of CRE since 2006 in order to prevent speculative dealings in such units. Since there are restrictions on transfer of such units and require government permission,the speculative activity in sale and re-sale of units is unlikely to be there. Therefore,such cases should be more like financing of industrial units or the projects and if such is the case,these would not be treated as CRE exposures, the RBI said. According to the RBI,the exposures to industrial units towards setting up of units or projects and working capital requirement,etc,would not be treated as CRE exposures.
Lending in respect of SEZs has been defined as one of the categories eligible for classification as infrastructure lending. Since certain types of exposures in respect of SEZs would have the characteristics of CRE exposure,these would simultaneously be classified as both CRE exposure and infrastructure lending. In such cases,the risk weight applicable would be that for CRE exposure and not related to borrowers rating. However,the exposure would be eligible for all the regulatory concessions available to infrastructure lending as per extant RBI guidelines, RBI said.
It said investment in the equity of a real estate company or a mutual fund/venture capital fund (VCF) or private equity fund (PEF) which invests in the equity of real estate companies, would be reckoned both as capital market exposure and the internal ceiling for real estate exposure fixed by the bank itself. Currently,such exposures would attract a risk weight of 125 per cent (as applicable to equity exposures) and 150 per cent (as applicable to exposure to VCFs) as these risk weights are higher than that applicable to CRE at 100 per cent.
