RBI to formulate guidelines on refinance for corporate projects

The Reserve Bank of India (RBI) would shortly come out with guidelines on refinance of existing projects as demanded by the industry, its deputy governor SS Mundra said on Wednesday.

"There is a demand from the industry for refinance of existing projects. RBI will come out with the guidelines soon," Mundra said at a Confederation of Indian Industry (CII) interaction in Kolkata.

The central bank's deputy governor said new projects would get the scope for refinance every five years till the economic life of the projects as already declared. However, for existing projects, the guidelines will be out soon, Mundra said.

Sounding a word of caution on big projects having thin equity, he said, "There are many projects based on thin equity. This is like skating on thin ice."

Mundra said that when economic growth is robust, such projects carry on as many of the ills are taken on stride. But when growth falters, signs of early distress crop in.

"RBI is keeping a vigil on projects which are having thin equity to see whether there are signs of early distress," Mundra said.

Ahead of the RBI central board meeting in the west Bengal capital on Thursday, Mundra said the apex bank was keeping its ears close to the ground.

The deputy governor said, "We are at a time when there is deflation, oil and commodity prices are down and food prices softening. There is room for softening of stance in the coming period."

But he gave a rider saying some uncertainties would always remain like the level of inflation, how it will move.

Mundra said the entire monetary policy of the Reserve Bank was based on five pillars. He said more players would be allowed in the market and licenses to payments bank and small finance bank would be issued in March or April.

Inflation targetting was the major issue with RBI for which there is shift from wholesale price index (WPI) to consumer price index (CPI), he said.

The apex bank had also gone for liquidity calibration to ensure that there was no volatility in the system, Mundra said.

Financial inclusion was also a major plank for RBI and it was not merely opening of new accounts, he said.

Mundra also advised businesses to come out of the quarter-to-quarter syndrome by taking unsound decisions which could be detrimental in the long run.