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Banker's body asks govt, RBI to provide 'priority sector' tag to road projects

Sector which presently qualifies for priority sector includes agriculture, education, renewal energy and MSME.

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Sector which presently qualifies for priority sector includes agriculture, education, renewal energy and MSME.
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Bankers' body IBA has asked the government and the Reserve Bank to accord 'priority sector' status to road projects as they play a key role in nation building.

Considering the importance of road sector in supporting economic growth and nation building, it should be classified as priority sector, Indian Banks' Association said in a presentation to the government recently.

The proposal of the industry body of banks has also found favour of Ministry of Road Transport and Highways and it plans to write to RBI to consider it, sources said. Priority sector tag for road projects will help greater access to the bank funding. As per the priority sector norms, banks have to necessarily provide 40 per cent of its total lending to the sector.

The rate of interest for priority sector is lower than usual corporate loans. Sector which presently qualifies for priority sector includes agriculture, education, renewal energy and MSME.

Besides, IBA has also suggested permitting flexible restructuring of long term project loans with debts below Rs 500 crore. Many road projects have debt below this level but have long concession period.
To give a fillip to the sector, RBI should also consider relaxing non-performing asset (NPA) norms for bank loans, it has suggested.

In case of stalled projects, where last mile funding has been given by National Highway Authority of India, any restructuring on account of the same shall not be classified as restructured or NPA, IBA has proposed.

As many as 19 projects entailing a capital investment of Rs 40,000 crore are stuck for long and the government is trying to revive those. The stuck projects belong to players like Larsen & Toubro, HCC, Gammon, Madhucon, Soma and Essel Infra, among others, while the list of lenders includes top names like State Bank of India, Punjab National Bank and Bank of India.Toubro, HCC, Gammon, Madhucon, Soma and Essel Infra, among others, while the list of lenders includes top names like State Bank of India, Punjab National Bank and Bank of India.

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