The Corporate Affairs Ministry has for now removed a recent legal barrier that sought to thwart infrastructure lending by banks. Now banks can continue infrastructure lending to special purpose vehicles on the strength of the guarantees or security provided by a holding company.
It has clarified that a holding company can (without any limit) give guarantee or provide security for loans made by a bank to a subsidiary company. This move will particularly benefit infrastructure lending by banks, according to bankers.
This dispensation, however, will be temporary in the sense that it would be available only till a provision (Section 186) in company law is notified, according to a Corporate Affairs Ministry circular.