For long, Indian public sector banks have taken the lead to provide the necessary funding for infrastructure projects in the country. In fact, much of the deteriorating state of affairs at State-owned banks in recent times is the result of their so called ‘compulsion’ to lend to core sectors such as infrastructure.
While funding very long-term infrastructure projects presents a host of challenges for Indian banks — only exacerbated by weak balance sheets — Infrastructure Debt Funds (IDFs), conceived to provide an additional funding route for such projects, have been able to tap into private funds and fund more projects over the past three years.
But with an asset base of a little over ₹10,000 crore (all IDFs put together) these funds are still tiny when seen in the larger context of banks’ lending exposure to the infrastructure sector. It’s time to ensure more bang for the buck.
