RBI nixes finmin plea to give infra sops to housing

Virtually turning down a finance ministry proposal, the central bank cited concerns about the likely adverse implications of an increase in banks’ exposure to the ‘risky’ sector, especially when banks’ non-performing assets (NPAs) are on the rise in a slowing economy.

Infrastructure status entails multiple benefits such as tax concessions and easier access to overseas loans, besides relatively cheaper bank funds on a priority basis. Currently, scores of housing projects across the country are stuck for a variety of reasons including want of requisite clearances, cautious lenders and higher cost of finance.

In line with the government’s policy, in the case of sectors accorded infrastructure status, the RBI classifies the loans as NPAs only if the borrower fails to commence commercial operations within two years from the original date set whereas other projects will get the NPA tag for a six-month lag.

In the aftermath of the 2008 global financial crisis, several developers in India too found it difficult to repay their dues. The RBI, on its part, has been keen to ensure that the banks’ risks owing to their exposure to the real estate sector are reduced so that there are no systemic problems.

The external commercial borrowing access for the sector was restricted to projects, rather than realty

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