We need a bank just for long-term credit

We need a bank just for long-term credit: Constrained by NPAs, banks are unable to extend long-term loans. It now seems that shutting pre-reform DFIs was premature...



The Hindu Business Line, April 9, 2017



WE NEED A BANK FOR LONG TERM CREDIT

C Rangarajan and R Sridhar



Excerpts:

"Long-term credit bank

The LTCB will need to be fully or substantially owned by GOI, but should be bestowed with full operational autonomy. LTCB may finance green field and brown field projects across manufacturing, infrastructure and other areas as may be considered fit.


Three distinct advantages may be identified for the LTCB. First, it is a response to the gap that has emerged in institutional financing structure and would thus have a ready market. Second, as a specialised institution with expertise in project finance LTCB will be able to better evaluate the loan proposals. It will also be able to attract suitable talent on ongoing basis which the banks may not be able to do. Third, LTCB can assist the faster development of the corporate bond market through credit enhancement, and partial credit guarantees.
A key element in the new scheme is that LTCB must be provided with low cost resources to enable it to lend to enterprises at reasonable rates. The model will not work otherwise. The DFIs currently in operation do enjoy such an advantage albeit, in a different way such as NABARD through Rural Infrastructure Development Fund, NHB — Rural Housing Fund — both of which are funded by penalties on non-achievement of certain Priority Sector targets by banks. LTCB must be permitted to avail of ECB and assistance from multilateral and bilateral agencies such as World Bank, ADB, JICA, KFW. Thus the LTCB will have a mix of funds, some raised at the market rate and some provided at a concessional rate. The new institution should be able to raise funds from the market on its own strength.
The current situation demands not only finding a solution to the high level of NPAs in banks but also to revive long term lending to industry. The latter needs an approach different from dealing with accumulated NPAs. Sharpening focus on investment-led growth is the need of the hour. It is time to rewind and set up term lending institutions with specialist skills dedicated to financing projects in manufacturing, infrastructure, and services sectors."

Comments

Post a Comment

Popular posts from this blog

NAVAGRAHA STOTRAM

NAVAGRAHA STOTRAM* According to astrology, the positions of the nine planets in the twelve constellations of the zodiac and their movements are considered to be quite significant. The nine planets ‘Navagraha’ affect every aspect of human life. They play an important role in the activities, physical and mental health and life of any individual. The unfavorable positioning of any of these planets can be the cause of problems, bad health, and stagnation for many people. However, there is a solution to avoid the ill effects of the position and movement of the ‘Navagraha’ in our lives. Navagraha mantras (or stotram) are simple mantras which work as powerful healing tools to reduce the negative effects of any of the nine planets. These mantras are Hindu holy hymn addressing the nine planets. Benefits Of Navagraha Stotram And The Way to Practice The Navagraha Stotram is written b y Rishi Vyasa and is considered to be the peace mantra for the nine planets. They are powerful m
Read more

THE SUNSET OF THE CENTURY

*SUNSET OF THE CENTURY: Rabindranath Tagore THE LAST SUN OF THE CENTURY SETS AMIDST THE BLOOD-RED COLOURS OF THE WEST AND THE WHIRLWIND OF HATRED. THE NAKED PASSION OF SELF-LOVE OF NATIONS IN ITS DRUNKEN DELIRIUM OF GREED IS DANCING TO THE CLASH OF STEEL AND THE HOWLING VERSES OF VENGEANCE. THE HUNGRY SELF OF THE NATION SHALL BURST IN A VIOLENCE OF FURY FROM ITS OWNSHAMELESS FEEDING FOR IT HAS MADE THE WORLDITS FOOD, AND LICKING IT, CRUNCHING IT AND SWALLOWING IT IN BIG MORSELS, IT SWELLS AND SWELLS TILL IN THE MIDST OF ITS UNHOLY FEAST DESCENDS THE SUDDEN HEAVEN PIERCING ITS HEART OF GROSSNESS…   *Note: “The Sunset of the Century”, translated by the poet, from Naivedya; The English Writings of   Rabindranathtagore, Volume II,Delhi 1996, page 466. Quoted in his article ‘Critiquing nationalism’ by K Satchidanandan (Frontline, November 14, 2014). The article takes you to a much broader spectrum. HAPPY READING(READ MORE STAN
Read more

The King of Ragas: Sankarabharanam

                       The King of Ragas                      --------------------------     Long ago  serpents were put to lot of hardships.They  were afraid of other animals. They had to seek refuge in the hermitage of sage Saraba.The sage was a true devotee of Lord Shiva.He used to pray Shiva with melodious songs. As he sang a particular raga the snakes were much inspired and they began to dance,. Slowly the serpents became friendly with the sage. They brought water in their mouths for the pooja.They secreted  a special fluid in which the flowers got stuck to their bodies.The sage was much astonished by the service of the snakes.As the sarpas became very close to the sage ,they requested him to help having Darsan of Lord Siva. As requested by the sage Shiva appeared in the form of  a  Kapalika and stayed in the ashram.The music and dance of the snakes continued. The snakes rendered service to the kapalika as they considered him  a Shiva bhakta.Shiva was much pleased with t
Read more