Huge Burden: PSBs Will Need Rs 1.7 Lakh Crore To Fund Their Future Projects

A recent Assocham-Crisil joint study titled 'Building A New India' noted that the public sector banks (PSBs) will need equity worth Rs 1.7 lakh crore, for financing future projects. It stated-

The public sector banks need equity of Rs 1.7 lakh crore by March 2019, which is a tall order considering that banks have so far contributed to nearly half of the debt funding needed in the infrastructure …A sharp fall in profitability has reduced capital generation from internal accrual of banks, while weak performance has diminished their ability to raise capital from external sources. And the capital needs can turn out to be higher if credit growth is stronger…..

The study suggested that the ideal mode of financing infrastructure projects is for banks to focus on funding up to the pre-commissioning stage of projects. The banks then must refinance the debt through bonds to long-term investors, this will free up considerable funds for banks and enable their redeployment in new projects. The report also highlighted that credit enhancement would be the key to making corporate bonds attractive to investors.

With IANS Inputs