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3 PSU banks have Rs 9,922 cr of NPAs in roads sector. Delays, low toll collection blamed

The banks shared data with the parliamentary panel on transport, tourism and culture, which was looking at aspects of lending to the road sector.

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New Delhi: Three public sector banks, including State Bank of India (SBI) and Punjab National Bank (PNB), are saddled with Rs 9,922 crore of non-performing assets (NPAs) in the roads sector, according to documents shared by the banks with the parliamentary panel on transport, tourism and culture.

NPA is defined as a loan for which the interest or principal have not been repaid by the borrower for a period of 90 days.

Among the PSBs, the State Bank’s NPAs stood at Rs 4,077 crore as on 30 June 2020, which is about 7 per cent of its outstanding credit of Rs 55,941 crore to the roads sector, showed the documents. The bank’s total exposure to the sector is Rs 71,546 crore.

Punjab National Bank’s bad loans in the sector stood at Rs 3,548 crore as on 30 September 2020. Its total outstanding to roads and ports sector was at Rs 30,400 crore, according to the documents.

The Central Bank of India’s NPA in the sector stood at Rs 2,297 crore as on 30 November 2020, which is 48 per cent of its outstanding credit, according to data shared with ThePrint by an MP who is part of the parliamentary panel.

Graphic: Ramandeep Kaur/ThePrint
Graphic: Ramandeep Kaur/ThePrint

The total outstanding of Indian banks to the road sector is Rs 1.95 lakh crore, showed the documents, which were presented by the banks to the parliamentary standing committee, which is led by BJP Rajya Sabha member T.G. Venkatesh, at a meeting on 8 January.

During the meeting, the panel heard the views of the representatives of PSBs and financial institutions on lending to the road sector. SBI chairman Dinesh Kumar Khara, PNB managing director and chief executive S.S. Mallikarjuna Rao and Central Bank of India MD Pallav Mohapatra were among those who attended the meeting.

ThePrint sent emails and WhatsApp messages to corporate communication officials at the State Bank of India and the Punjab National Bank Thursday morning for their comments, but did not get any response until the time of publishing this report.

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Delay in land acquisition among challenges

According to the MP mentioned above, representatives of various banks and financial institutions highlighted delay in land acquisition as one of the main challenges facing them.

“SBI chairman Dinesh Singh Khara told the members that there are many instances where project construction got delayed due to non-availability of land for actual construction purpose,” the MP told ThePrint.

Khara suggested that the National Highways Authority of India (NHAI) should provide details of land acquisition on its website at the bidding stage to all bidders. This detail should be updated every fortnight. The NHAI should also declare the appointed date — the official date for the highway developer to start work — based on such published details to avoid any contractual disputes at a later stage, the MP quoted Khara as saying.

PNB’s Rao also noted the issue of land acquisition delays, according to a second panel member who attended the meeting. Rao also flagged the poor quality of detailed project reports prepared for highway plans and how revenue generation from tolling did not match the traffic study estimate, affecting the projects’ financial viability.

The PNB MD also suggested that if toll collection is stopped on account of any court order or other unforeseen reasons, the NHAI should compensate the lenders promptly, the MPs said, adding that bankers also raised concerns over delays in obtaining the required environment and forest clearances.

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Dedicated funding agency needed

Highlighting the need for large funding for the road sector, as envisaged in the National Infrastructure Pipeline, SBI’s Khara said a dedicated financing agency for the sector should be established on the lines of similar agencies set up for the power sector like the Power Finance Corporation and the Rural Electrification Corporation.

“MPs including BJP’s Rajya Sabha member Sushil Modi supported the idea of establishing a dedicated bank with the expertise to appraise and finance road and port projects,” said the first MP quoted above.

PNB’s Rao suggested developing bond markets for long-term infra project financing supported by credit enhancement mechanisms.

In the 2020-21 Union budget, the road sector was allocated Rs 91,823 crore, a 10 per cent rise over the previous fiscal.

But officials in the Ministry of Road Transport and Highways said the funding requirement has increased substantially, with the government launching a number of big-ticket projects including Bharatmala and Delhi-Mumbai expressway.

SBI’s Khara told the parliamentary panel that the bank is in talks with the NHAI and state authorities for funding of large-scale greenfield projects such as the Delhi-Mumbai Expressway and the Ganga Expressway.

“Khara said that SBI has recently increased its internal exposure ceiling for the road sector by Rs 24,500 crore to ensure an adequate supply of credit,” said the first MP.

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  1. Delaying projects is a specialized and big business. The resolutions are largely subjective and the specialist brokers rake in big money needless to say for whom. The toll collection has also been a designed racket which seems to be getting destroyed by the fast tag. No more cash collection without receipts, no more sitting on the collections for days / months in convivence with the authorities.
    So the Banks can look forward to making up the losses.
    The game is you steal I catch.

  2. It seems plainly wrong that Banks should be lending to road projects which have long gestation period. Whereas, Banks usually hold deposits which mature in short term such as between 1 to 3 years. Rarely banks hold deposits maturing after 5 or 10 years. Little wonder these lendings show up as NPAs, though they may not be failures.

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