Banks insist on collaterals for film financing while IDBI is open to lending without asking for any collateral. Besides, banks finance film projects worth less than Rs 2 crore. IDBI is not keen on funding small movie projects.
The main difference between IDBI and banks is that we insist on collaterals when we fund a film project. Besides, we even fund very small film projects, said a senior official in a bank.
IDBI general manager Vinay Kumar who is in charge of film financing, however, said that talks were on for consortium lending. We are ready, if others are willing, he added. IDBI has taken the initiative in film financing and has sanctioned Rs 117 crore for 20 movies. The disbursal amount is Rs 60 crore.
Institutional financing in film making has been slow in taking off. Though Bank of India has a corpus of Rs 50 crore, it has only disbursed Rs 10 crore. Bank of Baroda also has taken a cautious approach.
We are open to financing more projects, but have not received credible proposals. We are looking at funding regional films. We are planning to form a regional panel for this purpose, said Bank of India deputy general manager S Kothandaraman.
Federal Bank has funded nine movies worth about Rs 18 crore. We are not enthusiastic about Hindi movies. We have funded mostly Malayalam movies, said an official at the bank.
According to Bank of India guidelines for financing film projects, collateral security worth at least 50 per cent of the loan amount is required. Besides, producers will have to bring upfront at least 25 per cent of the project cost as promoters contribution. They will be required to tie up the advances from the distributors (sales advances) so as to cover 35-40 per cent of the budget. Bank advance could be for the balance requirement of 35-40 per cent of the project cost.
Disbursement of bank loans normally starts only after utilising the promoters contribution and advance payments from the distributors. The application for credit limits is to be submitted in the prescribed format devised for this purpose.
The loan period will be based on the assessment of cash generation from the project. Repayment schedule is to be worked out on a case-to-case basis at the time of project evaluation, depending upon the projected cash flow.
Rights to music, CD/ DVD/ Internet, satellite TV, channel, and exports are to be assigned to the bank to serve as main security, along with the negative rights in the form of lab letter through appropriate documentation.