IndusInd Bank to beef up infra lending

To form project finance unit, will focus on renewable energy, port, roads

In a move to benefit from the government’s renewed focus to beef up the country’s infrastructure, private sector lender IndusInd Bank is beefing up its presence in the project finance space and is planning to grow its infra loan book to Rs 7,000-8,000 crore over the next three years.

The lender will also form a project finance unit and will focus on four segments — solar, wind, roads and ports.

The existing infrastructure portfolio, which is part of the corporate loan book, consists of telecom (2.02 per cent), power (1.86 per cent) and construction related to infrastructure (1.09 per cent). The total corporate loan book was Rs 40,376 crore at the end of March 2015.

An IndusInd Bank executive said the appetite for projects would be linked to credit profile and asset size of the bank. The risk weighted assets of the private sector lender stood at Rs 88,929 crore at the end of March.

While the demand for infrastructure financing is huge, the actual credit flow has been a subdued affair.

Many projects have been stuck due to problems, including delays in statutory and regulatory approvals and firming up fuel links, especially for power projects. Rising stressed assets in the core sector has made many lenders cautious in disbursing fresh credit lines.

The credit to infrastructure has grown by 10 per cent in 12 months to February 2015. The outstanding gross bank credit to infrastructure was Rs 9,11,800 crore, according to Reserve Bank of India (RBI) data.

The private sector lenders have not been active in lending to the infrastructure sector. Much of funding to power, ports and airport projects is provided by public sector banks.

Regarding raising funds for infrastructure projects, bank executives said it had raised about Rs 500 crore through seven-year infrastructure bonds in March 2015. The funds raised from these bonds are exempted from the obligation of the statutory liquidity ratio (SLR) and cash reserve ratio (CRR).  

RBI Governor Raghuram Rajan recently cautioned banks against excessive lending to the infrastructure sector.

“The nation has enormous financing needs in infrastructure, and far too many of our banks already have too much exposure. Big corporate infrastructure players have also taken too much debt,” the governor had said in a recent speech.

The governor had added that going forward, “we need to develop new sources of risk capital so that our infrastructure needs can be financed with moderate amount of debt, even as we help the system de-leverage”.