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SBI tightens infra project finance, not to fund interest payments

SBI tightens infra project finance, not to fund interest payments

State Bank of India has decided against funding interest during construction, a move that could spell further trouble for companies seeking project finance from the nation’s largest lender as they cannot keep interest payment pending until projects start generating revenue. The decision is aimed at de-risking the bank’s loan book, SBI chairman Rajnish Kumar.In infrastructure loans, the repayment period is usually long and the chances of the work getting stuck is high. Much of the Rs 8-lakh-crore nonperforming assets that the country’s lenders are sitting on are in the infrastructure sector.While staying away from funding interest during construction could cripple the fund flow to the infrastructure sector that is key to the efforts to boost economic growth, public sector banks are more focused on lessening the risk of bad loans. In fact, most banks have become averse to funding infrastructure projects.

Source :- ET Realty