Banks for changes in corporate borrowing pattern

Banks have approached the Reserve Bank of India (RBI) to reassess changes in the borrowing pattern of large companies it announced recently.

Companies that have a large loan book will have to raise 50 per cent of their additional capital requirement via bonds or equity. While this will boost the bond market, banks are concerned about financing of large infrastructure projects.

“Some concerns will be there for large infrastructure projects as they need huge capital infusion,” said PK Gupta, managing director (compliance and risk), the State Bank of India.

Bankers communicated their concern to RBI Governor Raghuram Rajan when changes in the lending policy were announced.

According to Gupta, greenfield projects were likely to be hit while there would also be some impact on brownfield projects.

The central bank wants to create a special class of large borrowers called specified borrowers. Companies that have a loan book of Rs 25,000 crore will fall under this category. Large companies accounted for 58 per cent of total bank credit of Rs 65,47,000 crore at the end of March.

The RBI’s move would result in the banks having to look for other avenues of growth like retail and rural credit, Gupta said. “The policy also aims at reducing the risk of bad debts,” he added.
 

The RBI is also considering capping a bank’s capital funds to a single corporate entity at 20 per cent of its Tier-I capital, and for a group of connected companies at 25 per cent.