The government has reviewed the Reserve Bank of India (RBI)’s draft rules for higher provisions in loans for infrastructure projects. On the other hand, creditors may oppose the proposal on various grounds. Officials have expressed concerns that the new move would lead lenders to raise interest rates and derail the pace of capital spending.
Following the proposal evaluation exercise, the draft rules will be discussed with the banking regulator during consultation. A day before the proposal was unveiled, shares of state-owned banks, non-banking finance comp.es (NBFCs) and infrastructure comp.es fell as investors worried that if the measures were implemented, there would be an adverse impact on the financial condition. May fall.
Finance Ministry officials clarified that there are draft guidelines and the consultation process is ongoing. All stakeholders will try to find a consensus solution to manage risks while supporting infrastructure financing. If banks and other ministries express any concern in this matter, then the information will be given to RBI. It is noteworthy that the regulator has sought feedback on its proposed guidelines by June 15.
On the other hand, banks and NBFCs have made up their mind to clash with the central bank against the sharp increase in provisions. Banks and NBFCs have also argued that amid global uncertainty, the RBI exercise could hamper India’s momentum of becoming the fastest growing major economy. Banks and NBFCs can also present their views against these proposals of RBI through the Indian Banks Association (IBA). They will argue that imposing higher provisions for issuing schemes may affect their efficiency as well as increase costs. All these adverse circumstances will cause loan delays and stress.
