RBI Eases Reserve Norms For Banks Issuing Infra Bonds


MUMBAI: The Reserve Bank of India, in order to encourage infrastructure development and affordable housing, exempted long-term bonds from the mandatory regulatory norms such as the Cash Reserve Ratio (CRR), the Statutory Liquidity Ratio (SLR) and Priority Sector Lending (PSL) 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 RBI said.

The 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 five years.

Source: PTI