Financing norms for infra, housing eased

In order to encourage infrastructure development and affordable housing, RBI on Tuesday exempted long term bonds from mandatory regulatory norms like CRR and SLR if the money raised is used for funding of such projects.

"Banks can issue long-term bonds with a minimum maturity of seven years to raise resources for lending to (i) long term projects in infrastructure sub-sectors, and (ii) affordable housing," the Reserve Bank said.

RBI said that apart from what is technically defined as infrastructure, affordable housing is another segment of the economy which requires long term funding.

The central bank said it intends to "ease the way for banks to raise long term resources to finance their long term loans to infrastructure as well as affordable housing".

The instructions are in pursuance of Finance Minister Arun Jaitley's Budget speech in which he had said "banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure".

Under the 5/25 structure, bank may fix longer amortisation period for loans to projects in infrastructure and core industries sectors, say 25 years, with periodic refinancing, say every 5 years.

RBI issued instructions to banks specifying operational guidelines and incentives in the form of flexibility in loan structuring and refinancing. It granted exemptions from regulatory pre-emptions, such as, cash reserve ratio (CRR), statutory liquidity ratio (SLR) and Priority Sector Lending (PSL).