RBI may review decision: Lending to SEZs

NEW DELHI: The Reserve Bank of India is likely to review its directive to commercial banks on treating loans to Special Economic Zones at par with real estate projects.

"RBI is likely to re-examine the issue of lending to SEZs," official sources said.

The central bank had last month clamped down banks' financing of SEZs by directing them to treat exposure to such projects as lending to commercial real estate.

However, earlier this month the RBI had in a master circular included SEZs in the list of infrastructure projects that would be eligible for priority sector lending.

Bankers had also sought clarifications on how to treat lending to infrastructure projects in SEZs.

Sources said the RBI could prescribe a graded structure of risk weights for bank finance to SEZs or lower the risk weights for lending to infrastructure projects in SEZs.

Following the RBI's decision, Commerce Minister Kamal Nath had taken up this issue with Prime Minister Manmohan Singh.

The Commerce Ministry, as well as SEZ developers, argue that the RBI's decision would substantially reduce bank funding for SEZ projects. It would also lead to a rise in interest rates for SEZs, as commercial real estate has a higher risk weight and requires higher provisioning by banks.