Government review of RBI draft regulation
The government and the Indian Banks Association (IBA) are currently reviewing the Reserve Bank of India’s (RBI) draft guidelines on project financing, which banks are concerned could result in additional provisioning requirements, financial services secretary Vivek Joshi stated on Friday.
According to Joshi, if the RBI’s draft guidelines are implemented, infrastructure companies might face increased interest costs as banks would likely pass on the additional expenses.“The government is evaluating the RBI’s draft regulations on project finance and will provide feedback if necessary,” Joshi said during a CII event.
He noted that banks are apprehensive about the possibility of increased provisioning requirements, which could be causing concern.The proposed guidelines could also potentially disrupt the highways sector, which has seen significant public capital expenditure over the years and was anticipating a resurgence of private risk capital.
The RBI released the draft guidelines on May 3 for public comment, covering the “Infrastructure, Non-Infrastructure, and Commercial Real Estate” sectors, with a deadline for comments set for June 15.The guidelines specify provisions for loans at different phases: design, construction, and commencement of commercial operations.Joshi refrained from commenting on the merger or privatization of Public Sector Banks (PSBs) during the ongoing Lok Sabha elections.When asked about reports of PSB mergers, he responded, “Elections are ongoing, so it is not appropriate to comment on such matters.”
In previous consolidation efforts, the government merged 10 PSBs into four in April 2020: Oriental Bank of Commerce and United Bank of India merged with Punjab National Bank; Syndicate Bank with Canara Bank; Andhra Bank and Corporation Bank with Union Bank of India; and Allahabad Bank with Indian Bank.Before this, Vijaya Bank and Dena Bank merged with Bank of Baroda, effective April 1, 2019.
