India needs Rs 31L cr for infra in five years, says CRISlL

Of this, about 70% will be required in power, roads and urban infrastructure sectors

India’s investment requirement in infrastructure sector could increase Rs 31 lakh crore over the next five years. Of this, about 70 per cent will be required in power, roads and urban infrastructure sectors, said a recent report by CRISIL.

This translates into more than Rs 6 lakh crore of investments every year or around Rs 1,700 crore every day from April 2015 to March 2020, said the report. In power, generation will continue to account for the largest share of investments, whereas in the roads sector, investments will be driven towards building national highways and state roads.

In urban infrastructure, the report said the municipal bodies will require significant investments for constructing urban roads, expanding urban transport, revamping water supply and sewerage infrastructure.

The report titled 'White Paper on Infrastructure Financing' released by Assocham and Crisil Ratings also evaluated the lending status of the key infrastructure sectors.

Over the past ten years, bank lending to the infrastructure sector has grown at a CAGR of 28 per cent, higher than the overall credit growth. Infrastructure's share of bank credit has doubled from 7.5 per cent in 2005 to 15 per cent in 2015, it said.

"This rapid growth in lending to the infrastructure sector poses the risk of an asset-liability mismatch (ALM) given that the infrastructure project loans have long tenures of 10 to 15 years while bank deposits, the main source of funds, typically have a maturity of less than three years. Moreover, several banks are also nearing the group exposure limits set by RBI for lending to large infrastructure players," said the report.

Hence the report suggested that banks should extend long tenor loans to infrastructure projects under a flexible 5/25 structure. "Crisil believes that the ideal mode for financing infrastructure projects will be for banks to focus on funding up to the pre-commissioning stage of projects," it said.