Lessons for lenders from PM Gati Shakti’s master plan

PM Gati Shakti’s National Master Plan (GSNMP) is designed to pool the collective power of government to execute infrastructure projects in advance. At the heart of the plan is the elimination of wasted budgets due to delays and overlapping project executions by different governments. Extending the spirit of Atmanirbhar Bharat’s mission – Autonomous India, the GSNMP is poised to unveil the future of India’s integrated employment-intensive development for the next 25 years. At present, the Rs 110 trillion megaprojects gathered under the 2020-25 National Infrastructure Pipeline (NIP) will be incorporated into the plan. It digitally brings together 16 critical ministries which include, among others, railways, roads, highways, oil and gas, telecommunications, electric navigation and aviation, etc.

It is a unique interactive platform for the coordination, planning of all infrastructure-focused projects under the NIP, breaking inter-ministerial silos so far. Mutual connectivity between ministries will be established through project geo-mapping to ensure the availability of real-time data in a centralized portal to ensure visibility of the progress and position of major projects. Live progress will ensure timely support and interventions in transparent project execution, minimizing the most common risks of time and cost overruns.

1. Extension of infrastructure:

Extended over a long period of 25 years, the GSNMP plans to develop 11 industrial corridors, two defense corridors in Tamil Nadu and the UP. The coverage of all the villages with the 4G network, the extension of the national road network up to 2 lakh kilometers, the construction of 220 new airports, helicopters and water aerodromes, 17,000 km of new gas pipeline are some of the objectives set in the plan.

It intends to engage state governments and local municipalities to join the platform so that information and data on all connected infrastructure and projects can be shared to leverage synergy from each other. Since the plan has been developed for a long time, a networked planning group with representatives from all relevant ministries will be set up to meet regularly to ensure coordination and an empowered group can make changes to the national master plan, if and when it is needed. The very thought process and spirit of the plan rests on three strategic pillars – coordination, cooperation and commitment of the respective ministries. Plugging leaks and resolving inter-ministerial conflicts can be a game-changer.

2. Infrastructure financing:

Inspired by the spirit of the GSNMP, the financial sector should prepare to improve the capacity to lend and assist infrastructure projects and their auxiliary satellites. Capacity building will require better risk management skills, an improved capital base, acceleration of debt resolution processes and increased scalability of the risk appetite of banks and non-banks to participate. to the changed business environment – after the pandemic.

Increasing information / data is vital for risk mitigation. The experience with infrastructure lending has not been very good, as bad debts in the sector accumulate. The RBI introduced the Centralized Large Loans Repository (CRILC) in 2014-15, a database aimed at meeting supervisory requirements by collecting information on systemically important credit exposures of Rs 50 million and above. Banks report the status of these large borrowers to the RBI. The RBI planned to introduce a public credit registry (PCR) to pool systematic credit information that could be explored by lenders in order to align a well-balanced credit rollout and develop better credit management strategies. credit risk.

3. Credit Information Status:

The inability to read the risk of infrastructure loans is mainly due to information asymmetry in the credit market. Adequate and real-time qualitative information on the status of borrowers / projects can mitigate risks to a large extent, as timely interventions will be possible. It can broadly address the issue of “adverse selection” and “moral hazard”. The sharing of credit information by a lending institution to a central branch is in the public interest and is widely used as one of its purposes to mitigate credit risk. This is why, in many countries, the task of organizing the collection and sharing of credit data via PCR is entrusted by law to a public authority, mainly the Central Bank.

In addition to secondary credit data with RBI, it has authorized all of its regulated entities to submit credit information individually to authorized credit information companies (CICs) to enable them to provide value-added services such as scoring and credit analysis to member credit institutions and borrowers. , for commercial purposes.

But such credit information for lenders is available in chunks. Data on borrowing from banks, NBFCs, market, ECBs, FCCBs, Masala bonds, B2B loans are not available in a single repository. It is therefore very difficult to get an overall idea of ​​the total indebtedness of a borrower.

A comprehensive repository of credit information covering all types of credit facilities (funded and unfunded) granted by all credit institutions – commercial banks, cooperative banks, NBFCs, MFIs – and also covering borrowing from others sources, including external commercial borrowings and market borrowings, is essential to ascertain the total indebtedness of a legal or natural person.

Inspired by the spirit of the GSNMP, lenders and regulators should work together and innovate in their methods, one of which is to share information through a public credit registry to improve lending capacity by pooling collective institutional power. Such massive infrastructure projects will require active financial intermediation with balanced risks. Quick reflections on lessons learned from the GSNMP can boost blue chip credit growth.



The opinions expressed above are those of the author.


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