With a number of projects being cleared by the Cabinet Committee on Investment (CCI), bankers foresee an uptick in corporate lending and significant recoveries in projects that they have already invested in.
Bank of India (BoI) has lent to 77 projects, of which 27 worth 1.38 lakh crore have been cleared. ?With some of the stalled projects having been cleared, we are seeing an uptick in project financing,” VR Iyer, chairman and managing director of BoI, said.
BoI had disbursed loans worth R14,000 crore for the 77 projects, while its exposure to the cleared projects is around R8,100 crore. A majority of BoI?s cleared projects are in the power sector.
Similarly, SL Bansal, chairman & managing director of Oriental Bank of Commerce (OBC), said of the 22 projects that the public sector bank has an exposure to, 18 have been cleared. OBC?s exposure to these 22 projects is R3,635 crore.
Meanwhile banks are seeing demand for project finance.?We have started getting proposals for new projects, mostly in the road sector,? CVR Rajendran, chairman & managing director of Andhra Bank, told FE. Andhra Bank has invested in 31 projects and promoters owe the bank over R4,000 crore. Andhra bank has an exposure of R1,200 crore to seven projects recently cleared.
OBC?s Bansal also believes road projects will get going, citing the case of Ashoka Buildcon?s Dhankuni-Kharagpur highway worth R2,016 crore to which the bank has lent.
In April, the then finance minister P Chidambaram said that the CCI has cleared 36 projects with an investment worth R1.83 lakh crore in a bid to restart the investment cycle.
The projects approved by the CCI included 18 power projects with an investment of R83,772 crore and nine other infrastructure projects with a total outlay of over R14,084 crore.
According to the Center for Monitoring the India Economy, there are 733 projects under implementation that are stalled, and 437 projects adding to an investment of Rlakh crore reached the CCI.
However, State Bank of India (SBI), the country?s largest bank, said that disbursals for the cleared projects might take at least six to nine months.
?We have not seen any benefit from the clearances of the projects. It will take some time,? said Pradeep Kumar, managing director for corporate lending, SBI.
Meanwhile, bankers say the new capex cycle will be delayed. ?There is some sentiment that the environment will improve right now. However, the investment cycle will take at least one year to revive,? said MS Raghavan, chairman & managing director of IDBI Bank. The lender was involved in 22 projects and it has started disbursing loan amounts to them after they were all cleared by the CCI, Raghavan added.
A recent report by global brokerage firm Credit Suisse echoed a similar sentiment and said, ?Only a fourth of projects are stuck with the Central government, and two-thirds of these are in power and steel, both wracked with massive overcapacity; thermal power utilisation is at two-decade lows. Only state governments can revive power demand. Even elsewhere (roads, railways, etc.), solutions will take years.?