The Reserve Bank of India’s (RBI) move to consider loans to public -private-partnership (PPP) projects as secured lending and initiatives such as the creation of Infrastructure Debt Fund (IDF) augur well for the ailing road building sector, ratings agency Icra has said on June 20.
Icra said in a note that in March, the RBI had allowed loans to PPP road projects to be treated as secured subject to certain conditions, which is expected to improve lending to the sector to some extent.
Apart from that, other initiatives like starting IDFs and the active role played by the re-financier India Infrastructure Finance Company (IIFCL) will also help the road building sector, it said. 18 projects awarded last fiscal could not achieve financial closure till March due to uncertainty on land acquisition and approvals as well as reluctance on the part of banks to fund the aggressively bid projects, Icra senior vice-president Rohit Inamdar said.
Additionally, he said, the pain inflicted by a slowing economy also leads to concern on the toll roads as traffic decreases, while additional interest rate burden resulted in pain on debt servicing capability. Many lenders have introduced stringent conditions like 100 per cent right of way, clearance and significant upfront contribution from promoters before the sanction/disbursement of the loan, he said.
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