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Sharp rise in banks' lending to infrastructure sector

Priya Nair

Lending to infrastructure is expected to increase in the rest of the fiscal, as most projects have long gestation periods and as credit disbursal is done in stages.

Mumbai , Nov. 7

BANK lending to the infrastructure sector has increased sharply in the recent past, thanks to the new projects being set up and the existing ones being expanded.

Some of the major public sector banks have seen their infrastructure portfolios almost double, in the second quarter of this fiscal. These include the State Bank of India, Corporation Bank, Union Bank of India, Bank of India and Bank of Baroda.

According to bankers, lending to infrastructure is expected to increase in the rest of the fiscal, as most projects have long gestation periods and as credit disbursal is done in stages. Some estimate a rise of at least 20 per cent from current levels.

"The increase in infrastructure lending indicates the robustness of the economy," said Mr Cherian Varghese, Chairman and Managing Director, Union Bank of India.

The bank saw a 67.10 per cent rise in infrastructure lending at Rs 4,532 crore against Rs 2,712 crore last year.

Segments such as road, power and telecom saw the maximum growth, said an official from the bank.

State Bank of India's infrastructure portfolio increased five-fold in the second quarter compared to last year. It funded roads, hydel projects and captive power plants, said an official from the bank.

The size of the loans varied from Rs 50-60 crore for the smaller road and hydel projects to Rs 100-250 crore for the bigger road projects. Lending to this sector is likely to double from the current levels, said the official.

Bank of Baroda doubled its infrastructure lending from around Rs 2,000 crore last year to over Rs 4,000 crore this year, said a senior official of the bank. (The major segments include power and ports.) "Many of our borrowers are large- and mid-size companies and all our projects are over Rs 100 crore," he said.

Corporation Bank sawits infrastructure portfolio as a proportion of net bank credit rise to 8.74 per cent for the quarter ended September 2005 from 3-4 per cent last year, said Mr V. K. Chopra, Chairman and Managing Director.

"By the end of this fiscal, I am hopeful infrastructure lending will rise to 10 per cent of the net bank credit," he said.

Bank of India's infrastructure portfolio increased by approximately Rs 1,000 crore to around Rs 4,500 crore in Q2 from Rs 3,500 crore last year, said a senior official from the bank. The bank expects to disburse Rs 1,500-Rs 2,000 crore in the second half of the fiscal, he said.

Acording to RBI figures, overall infrastructure saw a growth of 5.1 per cent for the first five months of this fiscal.

According to the Mid-Term Review of the Macroeconomic and Monetary Developments, cement, finished steel and coal sectors saw acceleration in growth.

As on August 19, 2005, the total outstanding credit to the various segments of infrastructure and the proportional increase were as follows: Power, roads, ports and telecommunications at Rs 82,444 crore, up 38.2 per cent; iron and steel, Rs 33,148 crore, up 25.6 per cent; petroleum, Rs 16,277 crore, up 7.6 per cent and cement, Rs 6,811 crore, up 18.2 per cent.

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