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Roads can offer higher returns than RBI, Nitin Gadkari tells banks

Union Road Transport Minister Nitin Gadkari said that banks can get a return of 6.5-7 per cent by investing in road projects

Nirbhay Kumar | July 15, 2020 | Updated 00:37 IST
Roads can offer higher returns than RBI, Nitin Gadkari tells banks
Union Minister Nitin Gadkari

KEY HIGHLIGHTS

  • Nitin Gadkari exhorts banks to invest in road projects instead of depositing money with RBI
  • Road Transport Ministry remains upbeat on awarding and constructing more road projects in FY21
  • Gadkari recommended innovative models engaging pension funds, insurance funds, NRIs, PIOs, other foreign investors could participate in India's growth story
  • Underlined the role of various financial institutions in supporting MSMEs, said there is enough capital in the system for this

Risk-averse banks earning interest income by parking their money with the Reserve Bank of India (RBI) can invest in road projects and get much better returns, Union Road Transport Minister Nitin Gadkari said.

Speaking at a webinar, Gadkari noted that toll income of National Highways Authority of India (NHAI) is expected to reach Rs 1 lakh crore in coming years and traffic density was on the rise offering a good opportunity for banks to invest.

"My toll income is Rs 28,000 crore per year now and our target is to reach Rs 100,000 crore per year. And when my income is there, I can monetise my projects. Traffic density has been increasing. So, the banks can invest in NHAI, or in road construction, or infrastructure. At least about road sector I am giving assurance that they will get good profits from it," Gadkari said.

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He said that banks can get a return of 6.5-7 per cent by investing in road projects.

While banks have generally been cautious with financing infrastructure projects, they hae become even more vigilant after the coronavirus pandemic that has created economic uncertainty across the sectors.

The Road Transport Ministry has, however, been bullish on awarding and constructing more road projects in the current fiscal. It has set an ambitious target of awarding contracts for 20,000km and building 15,000km of highways in FY21.

Gadkari noted that the economy was facing the challenge of investment and liquidity but suggested a host of measures to address the issues. He said that innovative models have to be found so that pension funds, insurance funds, NRIs, PIOs, and other foreign investors could participate in India's growth story.

"My feeling is that as far as returns are concerned, we are still in a better position. For the investment, return in India is very good. Now, the investor, particularly foreign investment is very important," the minister stated.

ALSO READ: RBI likely to pause rate-cutting cycle in August but it'll be short-term: Nomura

For supporting micro, small and medium enterprises (MSMEs), he highlighted the role of various financial institutions including credit co-operative societies and pointed out that there is enough capital available in the system.

"The role of all financial institutions is very important. In Maharashtra and Gujarat, only in Kolhapur district, the capital that we have with the credit cooperative societies is more than Rs 45,000 crore. In Maharashtra, the credit cooperative societies' capital is more than Rs 3.80 lakh crore. So, this is a big capital that is available which we can utilise for even giving support to the small people (MSMEs)," Gadkari said.

Apart from the Road Transport Ministry, Gadkari is also the Minister for MSMEs.

Gadkari acknowledged that MSMEs were not getting enough focus from banks and financial institutions and suggested the deposits available with various co-operative banks could be used to support them.

"This is the time we need to think about very, very small people who do not have house, paying capacity but have skill which can be used," Gadkari said.

ALSO READ: RBI's liquidity infusion helps raise Rs 1.87 lakh crore from primary corporate bond market

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