Public sector banks have questioned on delays in disbursing large loans
Public sector banks have been questioned by the government on delays in disbursing large loans to the fund-starved infrastructure sector. Last week, the government sought details of such delays on loans of ’100 crore or more for road projects and power. Data from the Reserve Bank of India (RBI) shows Loan flow to these projects is slowing. Chairman and managing director of UCO Bank Arun Kaul said “They have asked for the details of loans sanctioned.”
The chairman of a leading state-run bank and the other banker said they too received the finance ministry’s communication on this. They declined to be named. Public banks are reluctant to lend to road projects and power because they fear defaults and uncertainty on their completion. Analyst with Way2Wealth Brokers Pvt. Ltd Abhishek Kothari said “Banks are not keen to lend due to repayment issues.” because of a host of issues, Many projects are not being completed on time. They are particularly in the power sector.
The main hurdles forcing infrastructure companies to lag behind schedules are Delays in land and environmental clearances. Commercial banks are lending at 200-300 basis points (bps) over their base rate to infrastructure companies or minimum lending rate. 10-11% is the Base rate of most public sector banks.