ICICI Bank says no to SEZ exposure for now

Mumbai, Sept 28 | Updated: Sep 29 2006, 05:30am hrs
The countrys second largest bank ICICI Bank has said it will wait for the government to remove the cloud of uncertainty surrounding special economic zones (SEZs) before deciding on lending to such projects.

The bank would wait for the present uncertainty to settle down and for greater clarity to emerge, said KV Kamath, chief executive officer and managing director, told reporters on the sidelines of the Ficci-IBA Global Banking Conference here.

His comments come in the wake of differences within the government and the stand of the Reserve Bank of India (RBI) on whether the proliferation of SEZs would really bring economic benefits to the country.

The RBI last week directed banks to treat loans to such zones on par with lending to the real estate sectora decision aimed at limiting the exposure of commercial banks to SEZs.

The decision prompted the commerce minister Kamal Nath to criticise the central bank for what he said was an inconsistent approach toward SEZs.

He pointed out that the RBI had in its annual report applauded the SEZ scheme for accelerating economic development.

RBI in its report had termed SEZs as engines of growth..., said Nath, whose ministry is of the view that such zones would stimulate investments and earn Rs 44,000 crore in revenues for the government in a year.

But finance ministry estimates suggest that SEZs could lead to a revenue loss of Rs 1,75,000 crore in direct taxes, customs and excise duties over the next five years.

The IMF too had cautioned India to have a second look at the SEZ policy, saying it could lead to uneven development.

Earlier the managing director of the State Bank of India TS Bhattacharya had said that many of the SEZ proposals may not see the light of day except those promoted by the large industrial houses.

He also has said that the loans for the setting up of SEZs are likely to become costlier.