Letter to BS: Infrastructure financing is not the core competence of PSBs

It needs to be understood that infrastructure financing is not the core competence of the public sector banks (PSB). Unlike in the earlier days when there were institutional giants such as the IDBI and ICICI that were primarily set up to fund infrastructure, there are no such institutions in existence today. They have now been converted into commercial banks to gain access to low-cost deposits. Practically, the role of development finance institution is rendered outdated on account of the long gestation period and the high cost of deposits.

The issue is also about corporate funding as big ticket corporate loans granted by banks over a period have accounted for a chunk of the non-performing assets in the books of the banks. The credit committee decisions taken are based on the current market environment and it is not always that they hold right under all conditions which are fast changing in this increasingly globalised environment. If the level of NPAs is at an alarmingly high level, the confidence in PSBs is also at a historically low level. 

If the flow of credit to the vital sectors of the economy has to happen in an uninterrupted manner and we have to keep the wheels of the economy rolling, then who will do the infrastructure financing or corporate funding? This has to be worked out well. 

Srinivasan Umashankar,  Nagpur

Letters can be mailed, faxed or e-mailed to:

The Editor, Business Standard

Nehru House, 4 Bahadur Shah Zafar Marg 

New Delhi 110 002 

Fax: (011) 23720201  •  E-mail: letters@bsmail.in

All letters must have a postal address and telephone number