2024-09-06 15:59:16
“For retail, there is credit bureau but similar thing in infra is not available But for the credit bureaus, where would have been the fintechs” said NABFID MD and CEO Rajkiran Rai .” Nabfid is a new organistion and when we were looking at pricing, we were looking for numbers (on losses). Nowhere is it available. Whatever is available is lopsided data, is not correct data”
“When we were looking at pricing, we were looking for numbers (on losses). Nowhere is it available. Whatever is available is lopsided data, is not correct data. But for the credit bureaus, where would have been the fintechs. Such data is not available for the infrastructure sector” said NABFID MD and CEO Rajkiran Rai indicating that the sector does not have end to end data like retail or MSMEs .
The Reserve Bank has recently proposed a 5 percent provision on project loans under its draft guidelines for project loans which is expected to impact bank profitability and viability of such loans. ” Is 5 per cent true? HAM has zero default, solar financing is zero default. Now, where is 5 pc coming from? Actually it is less than 1 per cent. But then, you don’t have data to talk to the regulator. You need to have the data”.
Rai was speaking at a seminar organised by the Indian Banks’ Association (IBA) and Ficci. NaBFID is in the process of setting up an infrastructure repository that would strengthen the database through use of analytics and give an end to end data on infrastructure projects that will help all stakeholders including the regulators and lenders, according to Rai
” NABFID will be sourcing data from banks, infrastructure companies and from other government entities such as National Highways Authority of India (NHAI) and get all the data under one entity” Rai said at the sidelines of a conference .Speaking at the same session IDBI Bank MD and CEO Rakesh Sharma said that there is a good scope for increasing deposits as the lending is happening in job creating projects which in turn will incentivise savings and deposit growth.
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Lack of Data on Infrastructure Sector Hinders NaBFID’s Push for Higher Provisioning for Project Loans
The National Bank for Financing Infrastructure and Development (NaBFID) has expressed concerns over the lack of reliable data on the infrastructure sector, which is making it challenging for them to convince the regulator about the need for higher provisioning for project loans. NaBFID’s Managing Director and CEO, Rajkiran Rai, highlighted this issue during a seminar organized by the Indian Banks’ Association (IBA) and Ficci.
Gaps in Data Collection
Rai emphasized that unlike the retail sector, which has credit bureaus, the infrastructure sector lacks similar data repositories. This absence of reliable data makes it difficult for NaBFID to determine the accurate provisioning requirements for project loans. “When we were looking at pricing, we were looking for numbers (on losses). Nowhere is it available. Whatever is available is lopsided data, is not correct data,” Rai stated.
The lack of end-to-end data on infrastructure projects means that stakeholders, including regulators, lenders, and investors, are unable to make informed decisions. NaBFID is currently working on establishing an infrastructure repository that would utilize analytics to strengthen the database and provide comprehensive data on infrastructure projects.
Impact on Project Loans
The Reserve Bank of India (RBI) has recently proposed a 5% provision on project loans under its draft guidelines, which could significantly impact bank profitability and the viability of such loans. However, NaBFID argues that this provision may be too high, citing examples of sectors with zero default rates, such as HAM (Hybrid Annuity Model) and solar financing.
Rai questioned the RBI’s proposal, stating, “Is 5% true? HAM has zero default, solar financing is zero default. Now, where is 5% coming from? Actually, it is less than 1%. But then, you don’t have data to talk to the regulator. You need to have the data.” NaBFID believes that access to reliable data would enable them to make a stronger case for more accurate provisioning requirements.
Need for Infrastructure Data Repository
The infrastructure sector plays a vital role in India’s economic growth, and the lack of reliable data hinders the development of this sector. NaBFID’s initiative to establish an infrastructure repository is a step in the right direction. Such a repository would provide a centralized platform for data collection, analysis, and dissemination, enabling stakeholders to make informed decisions.
Conclusion
The lack of reliable data on the infrastructure sector is a significant challenge that NaBFID is facing. The establishment of an infrastructure repository is crucial to address this issue and provide a comprehensive understanding of the sector. Accurate provisioning requirements for project loans can only be determined with reliable data, and NaBFID’s initiative is a key step towards achieving this goal.
Keyword List:
NaBFID
National Bank for Financing Infrastructure and Development
Infrastructure sector
Data repository
Project loans
RBI guidelines
Provisioning requirements
HAM
Solar financing
Indian Banks’ Association (IBA)
Ficci
Infrastructure development
* Economic growth
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