In a relief for banks funding R7-lakh-crore-worth infrastructure projects that have been stuck for clearances, Prime Minister Manmohan Singh has decided to hold a high-level meeting on Saturday to chalk out an action plan to help them achieve financial closure.
Top finance ministry sources told FE that the meeting assumes significance as loans worth R53,000 crore have already been disbursed to various projects that are stalled for clearances.
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Banking industry sources said the delays in clearances to these projects, increasing non-performing assets and the tighter restructuring norms mean they will be reluctant in lending to infrastructure projects in the future.
Many of them, who have earlier lent heavily to infrastructure projects, are shifting focus to retail and SME loans to balance their portfolio.
Finance minister P Chidambaram is leading the efforts to help these projects overcome hurdles, official sources said. They said given the focus on scams and allegations of irregularities against the government, many officials are apprehensive of taking quick decisions on clearances to these projects.
The meeting will not only look into mega projects worth over R1,000 crore to be considered by the Cabinet Committee on Investments, but also find out reasons behind smaller projects worth R250 crore not taking off.
According to initial estimates, power sector projects around R5.5 lakh crore and road projects worth over R1 lakh crore are the worst hit. Public spending growth slowed to an annual 0.6% during the January-March quarter, 2012-13 from 2.2% a quarter go after the finance ministry slammed brakes on it to reduce a widening fiscal deficit. Annual capital investment growth dropped to 3.4% in the March quarter from 4.5% year-on-year a quarter ago, reflecting the regulatory bottlenecks that have hit investment in sectors such as mining, roads, ports and power.
Private spending grew an annual 3.8% during the quarter slower than 4.2% a quarter ago.
India’s industrial production grew at the fastest rate during the last five months at 2.5% in March.