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Delays in states' nod for infra projects worry banks

Source : BUSINESS_STANDARD
Last Updated: Mon, Nov 26, 2012 19:41 hrs

With sharp rises in stressed assets, commercial banks have raised concern over delays in infrastructure projects. Examples are the Hyderabad metro rail, expressways, seaports and roads, worth Rs 40,000 crore in southern states.

The Hyderabad Metro Rail Project (Rs 16,375 crore) has Larsen and Toubro Ltd (L&T) as developer. A date is yet to be declared. The company is in the process of obtaining clearances for quarries and permission to supply electricity for the project.

A senior public sector bank official said this matter was on the agenda at a meeting Union finance minister P Chidambaram had with chief ministers of south zone states in Bangalore last week.

The inordinate delays due to pending state government approvals and clearances in the south zone could force banks to restructure loans, with high cost for provisioning and interest concession. In an extreme situation, loans could become non-performing assets, senior public sector bank executives said.

Banks have sanctioned a significant amount infrastructure projects but many projects are held up due to pending regulatory clearances from different ministries and departments in states.

The central government has decided that major projects in the infrastructure sector (with investment of Rs 1,000 crore and above) will be specially tracked to take these forward.

The delays and bottlenecks would make it difficult to fund the huge outlay for infrastructure projects in the five-year plan (2012-17).

Bankers said an investment of Rs 41,00,000 crore is targeted during the plan period to sustain a yearly real economic growth rate of nine per cent. This is almost double the amount proposed under the 11th Plan in real terms (2007-2012).

Most commercial banks are finding it tough to take further exposure to infrastructure projects, as they have either reached sector limits or hit the ceiling for a single borrower or group. Also, they face challenge of matching assets and liabilities. Infrastructure projects have a long gestation period, while banks funds are predominantly of short or medium-term tenure.

Public sector banks have also flagged issues of inadequate co-operation, absence of staff and infrastructure with the district administration, especially in recoveries.
 

SELECT PROJECTS AT STATE LEVEL
Name of project In limbo Bank Project cost in Rs cr
Hyderabad 
Metro–L&T 
Nod to set up plants, 
quarries
State Bank of India 16,375
Nagarajuna oil
refining unit, 
Cuddalore
Clearance from 
controller 
of explosives
Bank of India 7,160
Krishnapatnam 
port
Procedural formalities 
and lease deeds
State Bank of India 3,824
NAM Expressway, 
Andhra Pradesh
NOC from pollution 
board
Canara Bank 1,761
IVRCL Chengapally 
Tollways
Execution of state 
support agreement
IDBI Bank 1,123




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