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BFSI Chronicle, 11 Edition September 2022
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without having proper development of infrastructure. funded and since new companies may not get triple A
Shri Khurana highlighted that the moment metro rating for bonds, pension funds and insurance funds
projects are started it automatically gives more are not still coming forward in a big way to finance
business opportunities to civil construction and civil the infrastructure. The funding for infrastructure is
construction automatically leads to more demand for done by three ways namely the central government,
cement, steel and labour also and so cement steel and the state government and 21% by the private players
employment all the three will be benefited through in the PPP model. He sounded hopeful when he said
construction activities and construction activity is that the funding for the 21% will be partly through
invariably linked to our infrastructure activity. gdp the capital brought in by the private developer
growth ultimately is dependent upon the goods and and primarily through the debt provided by the
services produced and infrastructure is becoming lenders. So this shows that hope and opportunities
a facilitator for that. He said that infrastructure are available to banks as lenders. Certain projects
projects are capital intensive and require huge finance became NPA or they became stalled partly because
infusion which gave birth to the PPP model. Earlier the skills available at that point of time with the banks
banks used to finance only working capital facilities for lending were not that robust and they were not
but they gradually shifted to term loans up to five able to assess or foresee certain risks in the projects.
years then went up to10 years for large projects but Therefore the proper assessment of the project
20 years or 30 years were not envisaged at any point becomes matter of utmost importance. To avoid this
of time. Though due to long gestation period each the recent guidelines of RBI have put the onus of
project requires three to five years for the construction risk and sensitivity analysis, appraising technical,
and after the construction the project requires a financial feasibility and bankability of the projects
lifetime of 20 to 30 years because less than 20 to 30 on the banks and the lenders i.e. the banks should
years the project will not be viable or profitable to have the requisite expertise for the same. He also
provide the required returns to the private developer mentioned the role of securitization process which
or provide the required kind of supports to the is very much relevant in infrastructure funding.
government also. So each is planned and envisaged Shri Khurana said that the book “Aide Memoire in
for a long period of 20 to 30 years. Banks are one Infrastructure Financing” published by ICAI is in
of the most important contributors to the funding fact an enabler for each one of us to understand the
of an infrastructure project. Infrastructure project nuances and the basics of funding so that we become
financing is different from corporate financing as it equipped and prepared to take up this challenges in
is not based on balance sheet of the company rather infrastructure financing. He also said that the CMAs
than on particular projects. The size of financing is are in the best position to judge the cost overrun and
determined specifically based on the project while in cost assessment and stressed on the role of ICAI in
the case of corporate financing, it is flexible and can producing professionals well equipped to handle all
be done on year-to-year basis. He touched upon the these things in a proper manner.
concept of SPV and gave the overview of the financing
across banking and NBFCs. CMA Arup Sankar Bagchi, Senior Director, HoD,
BFSIB, gave the vote of thanks and expressed his
Due to the recent flexible rules and regulations , gratitude to the esteemed speaker for such an
Mr Khurana said that new entrants can also come insightful webinar.
forward and become developers so that infrastructure
can develop in a big way. Overseas investors in his Shri C M Khurana, Former CGM and CFO of Oriental
opinion are more interested in brownfield projects Bank of Commerce deliberating in the first webinar
rather than greenfield projects and that is why the of the Banking Month on the topic of “Infrastructure
concept of monetization has come into existence. Due Financing- A Panacea for Development of New India”
to the current guidelines , AAA bonds can only be

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