Banks have planned to Issue bonds for infra projects

By | September 16, 2011

According to a recent press report, Government is likely to allow banks’ to raise long term resources for infrastructure financing through issue of development bonds. The Department of Industrial Policy and Promotion (DIPP) in a discussion paper said that banks would be permitted to raise long term resources through issuance of development bonds, for the purpose of long term project finance. It said that the banks may be encouraged to finance for the high risk project with the support of suitable Central Government by diversifying the risk and funding sources.

The infrastructure sector requires a huge funding of $1 trillion in the 12th Plan (2012-17). At present, the banks have the problem of financing the infrastructure projects, which obtain extensive growth period. The gestation period of these projects is moderately long and it takes 7-10 years for attaining the revenue.

The maturity period for source of financing from the customers in every bank’s would be limited that is normally from three- five years. This creates a problem of “asset-liability mismatch” discouraging banks to fund the infrastructure projects. It said that if banks are allowed to raise long term resources through development bonds it would solve the problem of asset-liability management.

Recently banks have asked the RBI to take a break from its monetary tightening cycle which has made home loan and other loans very expensive.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit for the latest rates/offers.
Category: Articles Glossary Tags: , ,

About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

Leave a Reply

Your email address will not be published. Required fields are marked *