Banking 167

For first time in last 6 years, 9% growth in bank financed projects

for-first-time-in-last-6-years-9-growth-in-projects-financed-by-banksCapital expenditure financed by banks and Financial Institutions (FIs) has gone up in current financial year for the first time in six years, the Reserve Bank of India (RBI) has revealed.

According to the data released by the apex bank, in this financial year, banks and FIs have financed 352 projects worth Rs 95,400 crore whereas for the same period of previous financial year 326 projects worth Rs 87,300 crore were financed by the banks and FIs.

Though, there is rise of 9.3% in FY16 from FY15, it is far behind Rs 5.56 lakh crore of capital expenditure financed by banks and FIs in FY10.

The central bank has revealed that 41.6% or Rs 39,700 crore of this sanctioned amount was planned to be incurred in FY16 itself and 30.9% or Rs 29,500 crore was to be spent in FY17.

Though optimistic, analysts aren’t entirely convinced if this represents a big reversal in trend. “It is somewhat positive that there is an improvement in the total sanctions by banks/FIs towards newer projects both in number of projects as well as value of the project,” said an analyst at Jefferies, the global investment banking firm. “A sustained trend over the longer term in this direction should help improve sentiment and bank loan growth,” said another analyst. They also pointed to the fact that the majority of these new sanctions are for projects of very low ticket size.

According to the data released by RBI, accounting for 56.7% of the fresh sanctions, power sector was the most dominant sector for new sections. Infrastructure sectors like roads, bridges and waterways; ports and airports; storage & pipeline and textiles sector each accounted for around 4% of the new sanctions in FY16. Share rise in these sectors as compared to the previous year was another most promising  thing.

Though there is a rise in funding of capital exchange but there was a decline in the amount companies raised through ECBs and foreign currency convertible bonds (FCCBs) for the third consecutive year in FY16. As compared to the 478 firms which had contracted ECBs/FCCBs worth Rs 57,200 crore in FY15, only 314 companies contracted worth Rs 38,800 crore in FY16 to fund their capex, says the RBI statistics.

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