In fact, recognizing the importance of infrastructural development in the country, RBI has provided certain concessions/relaxations in lending to infrastructure sector, such as, enhancement in single/group borrower limits, permission to issue guarantees favoring other lending institutions in respect of infrastructure projects, asset classification benefits under restructuring guidelines and permission to extend finance for funding promoter’s equity, subject to certain conditions.
In order to encourage lending by banks to the infrastructure sector, banks are permitted to finance SPVs registered under the Companies Act, set up for financing infrastructure projects, after ensuring that these loans / investments are not used for financing the budget of State Governments.1 RBI, in a recent circular (March 18, 2013), has allowed the debts due to the lenders in case of Public-Private Partnership (PPP) projects to be considered as secured to the extent assured by the project authority in terms of the Concession Agreement, subject to certain conditions.