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Do not allow infra project funding to jeopardise financial stability: Rajan

Do not allow infra project funding to jeopardise financial stability: Rajan
“The nation has enormous financing needs in infrastructure, and far too many of our banks already have too much exposure. Big corporate infrastructure players have also taken too much debt,” Rajan said at a function to mark 80 years of RBI in the presence of Prime Minister Narendra Modi and Finance Minister Arun Jaitley.

“The required national push to finance infrastructure should not override financial stability, which is key to national security,” he added. The non-performing assets (NPAs) of banks in the country stood at over Rs 3 lakh crore as on December 2014. Banks had to tide over a tough time as the power sector faced troubles after the Supreme Court last fiscal cancelled the allocation of 204 coal mines by the previous government.

Pushing for investments in infrastructure, Jaitley in the Budget 2015-16 has proposed a sizeable Rs 70,000 crore increase for the sector besides a slew of steps to spur its growth. The 12th five year plan (2012-17) envisions $1 trillion investment in the infrastructure sector, of which 50 per cent is expected to come from private sector.

Jaitley had also stressed on the need to revitalise the public private partnership mode of infrastructure development. Listing infrastructure among five major challenges he has to reckon with, Jaitley had said that it is a challenge for government to increase investment in the sector. With private investment in infrastructure via the PPP model still weak, public investment needs to step in, to catalyse investment, he had said. Stating that there has always been a “constructive dialogue” between RBI and the government, Rajan underscored the need to nurture strong institutions like the central bank.

“Strong national institutions are hard to build. Therefore existing ones should be nurtured from the outside, and constantly rejuvenated from the inside, for there are precious few of them,” he said.

The comments from the Governor come in wake of a new set of reports indicating differences between the Mint Street and the North Block following certain budget proposals indicating moving away certain functions from the central bank.
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