New Delhi: Industry body Assocham on Wednesday urged the Reserve Bank of India (RBI) to have the refinance facility for banks so that they can lend to the core sector at competitive rates and help the sector meet its requirements for ongoing projects.
“This facility will help banks to lend to infrastructure sector at competitive rates, which in turn will enable the infrastructure service providers to ensure adequate low-cost funding to their projects thereby increasing the viability,” the chamber said.
Refinance means credit counter-guarantee, by which banks are reimbursed if the money lent is not returned.
In a note submitted to the Prime Minister Office, the Planning Commission and the cabinet secretariat, the Chamber said, “Many of the infrastructure projects are confronted with the risk of high-capital cost and low-operating margins.”
The industry body also asked banks to raise funding to the sector by increasing the exposure limit.
“Given their huge size, infrastructure projects involve high initial funding and a set of complex financial and contractual arrangements,” the industry body said.
It added that the sector has a huge fund requirement and several banks and institutions are involved in the financing of infrastructure projects, as no single entity is capable of doing it alone and, therefore, prefer to do it jointly.