Assess risks of realty loans, RBI tells banks

 
“... some of the companies operating in the real estate sector have significant exposure in the form of advances, investments, etc. to their subsidiaries and other group or related entities,” Reserve Bank of India said in a notification.

As a matter of prudence, banks may meticulously assess the inherent group risk of their borrowal accounts falling under the purview of real estate sector, the Reserve Bank of India added.

The central bank further said that while assessing the loan requirements of large builders or land developers, they may carefully analyse the financial credentials and viability of the borrowers supported by the position of the group.

The banks may also examine the financial credentials or viability of the relevant unconsolidated related entities such as Special Purpose Vehicles, Reserve Bank of India added. If the Reserve Bank of India advice is headed by banks, they will assess the risks associated with other interests of the real estate companies and may reduce the loans depending on the risk factor.

Some real estate companies have other business interests also.

Mobile telephony

For example, DLF has joint venture in life insurance business with US-based Prudential Financial. DLF has also forayed into the infrastructure, Special Economic Zones and hotel businesses.

Also, Unitech has interests in mobile telephony. The company will be launching its mobile services by end of this year under the brand name Uninor in partnership with Norway based Telenor.

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