RBI relaxes norms for core funding

The Reserve Bank of India (RBI) has relaxed the provisioning norms for bank advances extended to infrastructure projects. Bank-financed infrastructure projects will be treated as substandard if commercial production commences one year after the date of completion.

Earlier the asset was treated as substandard if commercial production commenced six months after the date of completion of the project.

The RBI move is important in the light of huge fund requirement by power, airport, road and such projects including special economic zones (SEZs). Commercial banks "� both private and public sector "� are financing SEZ projects across the country.

"The move will help prevent the account from becoming a bad asset as it has big implications in terms of making provisions and erosion in capital adequacy,'' said a senior Bank of India official.

"Infrastructure projects require heavy fund outlays with long gestation periods due to many inherent factors such as statutory and regulatory clearances, land acquisition, resettlement/ rehabilitation of displaced people, among others," RBI said.

The government has envisaged an investment of around $350 billion for infrastructure projects in the 11th Five Year Plan.