rbi: Follow instructions in letter and spirit while funding infra projects of government entities: RBI to banks

Involved over violation of its norms, the RBI on Tuesday requested banks to observe its directions in “letter and spirit” whereas extending loans to government-owned entities for infrastructure and housing projects.

In a round, the RBI mentioned it has come throughout cases the place banks haven’t been strictly complying with extant directions on evaluation of business viability, ascertainment of income streams for debt servicing obligations and monitoring of finish use of funds in respect of their financing of infrastructure/ housing initiatives of government-owned entities.

Banks/ monetary establishments have additionally been discovered to have violated RBI’s directions which require that in case of initiatives undertaken by government-owned entities, time period loans ought to be sanctioned just for company our bodies.

Additionally, due diligence ought to be carried out on viability and bankability of the initiatives to make sure that income stream from the undertaking is enough to handle the debt servicing obligations, it mentioned.

“Consideration of the banks is very drawn in direction of the particular directions…It’s reiterated that banks are required to observe these directions in letter and spirit,” the Reserve Bank of India (RBI) mentioned.

The RBI additionally requested the banks to hold out a evaluate and place earlier than their boards a complete report on the standing of compliance with the directions inside three months.