Banks bet on new govt to revive capex

Tags: News

20% of projects cleared by CCI report additional delays

Banks expect India Inc’s capex cycle to turn around only after the second half of this financial year, which will also help the credit cycle to pick up.

Several stalled projects as well as new projects will likely go on stream once the new government takes office at the Centre and clears various hurdles.

The nation’s biggest lender is not advancing any credit to greenfield projects. “We are financing only brownfield projects and advancing working capital loans,” said RK Saraf, deputy managing director and chief financial officer of State Bank of India (SBI).

He said the credit cycle was yet to pick up and the bank expects to report 16 per cent deposit growth and 15 per cent credit growth for the financial year ended on March 31.

The cabinet committee on investment (CCI), set up in December 2012 to expedite stalled plans, and the prime minister’s project monitoring group (PMG) have cleared impediments for 296 projects involving an estimated cost of Rs 6.6 lakh crore till the end of January. But 20 per cent of them have reported additional delays.

RBI data showed 15-20 per cent of the projects cleared, which are mostly in the roads, power and petroleum sectors, have reported additional delays, for which the dates of completion have been extended further.

Also, there has been an increase in the number of projects without commissioning dates, mostly in the roads sector, which showed growing uncertainty over their completion.

Many of these will take more time before they are taken up for implementation, kicking off the investment cycle.

Another 284 projects worth Rs 15.6 lakh crore were under the consideration of the PMG at the end of March. Official data showed a slight drop in the number of central sector infrastructure projects that have got delayed. An RBI analysis of bank financing patterns showed intentions of corporate investment improved in the third quarter of 2013-14 compared with that in the previous quarter.

Banks extended financial assistance to 179 new projects with an estimated cost of Rs 79,100 crore during the quarter, compared with a pipeline of 116 projects worth Rs 32,100 crore in the second quarter. This improvement was mainly in the power and cement industries, the report said.

Jaydeep Iyer, deputy CFO and group president at Yes Bank, said, “We expect the capex cycle to revive only in the second half of the financial year, as the new government will take time to revisit policies and build consensus with the state governments.”

Yes Bank has been selective in advancing credit, lending to only select sectors like export, pharma and hotel sectors. “We are keeping away from the construction and infrastructure services. Our focus will be retail. About 22 per cent of our loan book is retail, which includes SMEs, micro-SMEs, commercial vehicle, construction equipment and gold loans,” Iyer said.

Yes Bank expects to report about 14 to 15 per cent credit growth for the year gone by.

RBI data released on April 30 showed a slight deceleration in both credit and deposit growth. For the fortnight ended April 18, total credit flow dropped by 0.84 per cent to Rs 62,21,217 crore, while deposits fell by 0.75 per cent to Rs 80,90,179 crore.

Rating agency Icra expects domestic banks to see 12.75-13.50 per cent deposit growth and moderate credit expansion during FY15. The rating agency said based on expectations of GDP growth in excess of 5 per cent, retail loans were going to be the focus area.

“Lending to firms may pick up only after a broadbased revival in economic growth, once the financial health of the corporate sector improves. The overall credit growth should be in the range of 13.50-14.50 per cent,” Icra said.

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