Losing ground, India's financial institutions are increasingly shying away from financing the projects for various reasons including the weak position of IDBI and IFCI, spread of universal banking and the financial restructuring of FIs.
The pre-budget survey, tabled in Parliament on Thursday, said "FIs, which constitute an important source of funds for the commercial sector, have been fast losing grounds" highlighting that the sanctions and disbursements by the FIs were down by 51.4 per cent and 47.4 per cent respectively in the first nine months of this fiscal.
"The declining trend in sanctions and disbursements is mainly on account of reduction in number of project proposals seeking financial assistance, weak financial position of IDBI and IFCI, financial restructuring of asset portfolios of Fis and spread of universal banking," the survey said.
The total loan sanctions made by FIs stood at Rs 13,217 crore (Rs 132.17 billion) till December 2002 as compared to Rs 27,174 crore (Rs271.74 billion) in the corresponding period in the previous year.
The total disbursements by FIs fell to Rs 11,432 crore (Rs 114.32 billion) during April-December 2002-03 as against Rs 21,741 crore (Rs 217.41 billion) in the first nine months of the previous fiscal, it said.
"The situation has come about as a result of distinction between development and commercial banking getting blurred, high cost of funds and asset-liability mismatches," it said.
With merger of ICICI with ICICI Bank, the role of FIs had "subsided" further citing that ICICI alone had accounted for over 49 per cent of sanctions and 45 per cent of disbursements of FIs, it said.
PTI
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