RBI pulls up banks for flouting norms on infra loans to govt cos
RBI pulls up banks for flouting norms on infra loans to govt cos
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Concerned over non-compliance with its norms, the Reserve bank of India (RBI) asked banks on Tuesday to follow its guidelines "to the letter and spirit" when issuing loans to government-owned firms for infrastructure and housing projects.

The RBI stated in a circular that it has come across instances where banks have not strictly followed existing instructions on assessing commercial viability, determining revenue streams for debt servicing obligations, and monitoring end use of funds in respect of their financing of government-owned entities' infrastructure/housing projects.

Banks and financial institutions have also been found to have disobeyed RBI instructions, which state that term loans should only be granted to corporate organisations in the event of projects performed by government-owned entities. It further stated that due diligence on the projects' viability and bankability should be performed to guarantee that the project's revenue stream is sufficient to cover debt servicing requirements.

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