NabFID's Rajkiran Rai Challenges RBI's Proposal on Infrastructure Loan Provisions

Rajkiran Rai, managing director of NabFID, questioned the RBI's proposal requiring lenders to set aside 5% for under-construction projects. He argued that non-performing assets (NPAs) on infrastructure loans are less than 1%. Rai emphasized the need to change the perception of infrastructure finance as risky and cited low loan default rates in recent years.

Infra financier NabFID's managing director Rajkiran Rai on Friday criticized the Reserve Bank of India's (RBI) proposal requiring banks to set aside 5% provisions for under-construction projects, arguing that the default rate on such loans is significantly lower.

Rai mentioned that the incidence of loans turning sour in the infrastructure sector has decreased in recent years, leading to lower risk-based pricing by banks. He emphasized the need to change negative perceptions surrounding infrastructure finance.

Rai added that the actual default rate on infrastructure loans is less than 1%, and highlighted the robust competition among banks for hybrid-annuity model road projects and solar projects with almost zero defaults.

(With inputs from agencies.)