Monday , July 23 2018

India Considers Help from Private Banks to Plug Infrastructure Gap

Government of India is turning to the private sector for seeking help in $1.5 trillion infrastructure gap

India considers seeking help from the private sector to clear a chronic insufficiency of capital for infrastructure projects. The Reserve Bank of India is recommending licenses to private companies for setting up the infrastructure banks. This step will aid financial assistance of $1.5 trillion in roads, ports, power and other projects over the next 10 years. And this would bridge a gap that ratings agency Standard & Poor’s states is shaving off nearly 5 percent of the country’s gross domestic product.

“Specialized banks could cater to the wholesale and long-term financing needs of the growing economy and possibly fill the gap in long-term financing,” the RBI said in a discussion paper released from Mumbai on April 7.

The commercial banks are over-burdened with nonperforming loans and credit growth weakening at decade lows this has led lenders restrained to invest in any such projects which require a long waiting period to obtain profit.

This could impact Prime Minister Narendra Modi’s government is striving hard to spark investment which also comprises clearing backlogs of billions of dollars of stalled projects.

All the Governments from different parts of the world are striving hard to find ways to finance public projects. One such initiative was State-backed lending led by China Development Bank which generated infrastructure construction in China in the last year. It also raised funds by local governments by selling bonds.  along with funds raised by local governments through bond sales. Canada is also finding ways to set up a new infrastructure bank by attracting pension funds and global money managers in this year. The plan involves the funding of C$35 billion ($26 billion) in funding and moreover, U.S. President Donald Trump has promised to spend around $1 trillion.

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