RBI warns banks against excessive lending to infra projects

Cautioning banks against excessive lending to the infrastructure sector, RBI Governor Raghuram Rajan on Thursday said such loans should not override the overall financial stability, which is "key to national security".

"The nation has enormous financing needs in infrastructure, and far too many of our banks already have too much exposure. Big corporate infrastructure players have also taken too much debt," Rajan said at a function to mark 80 years of RBI in the presence of Prime Minister Narendra Modi and Finance Minister Arun Jaitley.

"The required national push to finance infrastructure should not override financial stability, which is key to national security," he added.

The non-performing assets (NPAs) of banks in the country stood at over Rs 3 lakh crore as on December 2014. Banks had to tide over a tough time as the power sector faced troubles after the Supreme Court last fiscal cancelled the allocation of 204 coal mines by the previous government.

Pushing for investments in infrastructure, Jaitley in the Budget 2015-16 has proposed a sizeable Rs 70,000 crore increase for the sector besides a slew of steps to spur its growth.

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The 12th five year plan (2012-17) envisions USD 1 trillion investment in the infrastructure sector, of which 50 percent is expected to come from private sector. Jaitley had also stressed on the need to revitalise the public private partnership mode of infrastructure development.

Listing infrastructure among five major challenges he has to reckon with, Jaitley had said that it is a challenge for government to increase investment in the sector. With private investment in infrastructure via the PPP model still weak, public investment needs to step in, to catalyse investment, he had said.