Consider infra loans as priority advances: Banks to RBI

Bankers have urged the Reserve Bank of India (RBI) to include infrastructure loans in the category of priority sector advances and exempt infrastructure bonds from mandatory cash requirements, as they struggle to finance long-term projects.

Bankers, at a meeting today with the RBI Deputy Governor Usha Thorat here today, told the apex bank that funding long-term infrastructure projects may increasingly face issues in the future on account of the huge asset-liability mismatch.

Banks are reluctant to lend to infrastructure projects having longer gestation periods as they raise deposits, which have comparatively shorter maturities. This result in asset-liability mismatch.

"We have made two suggestions to the RBI to help us to fund infrastructure projects. One is considering such loans as priority sector advances. The other is giving CRR exemption for infrastructure bonds," UCO Bank Chairman S K Goel told PTI after the meeting.

Banks are required to keep at least 40 per cent of their net bank credit to the priority sector. At present, advances to the infrastructure sector are not included in this, Goel said.

"We have made these suggestions and RBI has assured that they would consider and address these issues," Goel said.

Exemption of infrastructure bonds from the CRR requirement will enable banks to raise money through bonds, which could, in turn be deployed to lend to infrastructure borrowers.

Banks have also asked for reduction in savings deposit rates in the backdrop of the apex bank directive requiring them to calculate savings account deposit rates on a daily basis from April 1.

"We have made this request that the savings account deposit rates should be brought down or postpone implementation. This is because it (calculation on daily basis) will affect our margins," Union Bank of India Chairman M V Nair said after the meeting.

Bankers also discussed a host of other issues such as migration to the international financial accounting standards and the ongoing financial inclusion programmes with the RBI during the meeting.