With average budget for a movie rising to a massive Rs 50 crore, the film industry’s is finding it increasingly difficult to raise finances.

Both banks and traditional financiers are unable to fund projects because of the risks involved and scanty mitigation options available.

Compensations of lead actors and technicians have grown manifold in the past couple of years and this has led to an increase in budgets. About 60 per cent of a film’s budget comprises fees paid to stars and lead technicians.

“Film financing is and will be a risky proposition. The problem is with predicting success of films, which cannot be derived from mathematical equations,” said R Ravichander, group executive vice-president of YES Bank, at the media and entertainment conclave organised by Ficci in Chennai on Wednesday.

Organised financing options are already scarce, given the restrictions in funding such as collateral requirement and loan clearance before release of films.

Even traditional lenders that do not ask for collateral or insist on paperwork are finding it hard to extend credit, said Sanjay Wadhwa of the AP International Group. The company is a second-generation film-financing group.

“There is still no paperwork in traditional financing but transactions happen through cheques and not cash as in the past. Film funding is costly because there is no asset till a film is completed and distributors are willing to buy the content,” he added.

When budgets run high, there are lesser options to recover the costs and funding becomes tough. Financiers like AP still fund a majority of projects in the country because organised funding is still a far cry.

Even banks that claim to support film producers deal with only the top five per cent of the production houses and their investment exposures are miniscule compared to the size of their operations, he said.

Uco Bank has so far funded 67 films to the tune of about Rs 400 crore. Uco has the maximum exposure to film financing in India, According to N Kumaraswamy, field general manager of Uco Bank, Chennai, “The Reserve Bank of India has given directions to banks to increase funding to films primarily to reduce the amount of black money involved. However, banks do not understand the nuances of the business and the operation cycles, he said.