The amount sanctioned is an unprecedented disbursal amount by India's largest public sector bank to any entity.
Moneycontrol News
National Highways Authority of India (NHAI) on Friday signed a memorandum of understanding (MoU) with States Bank of India to receive Rs 25,000 crore as a long-term, unsecured loan for 10 years.
"It's a historic day as the country's largest state-run bank has invested it's largest amount in a government body," said Nitin Gadkari, union minister for road transport and highways.
He said that bankers should be considered as an individual stakeholder whose opinion must be considered.
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The unsecured loan has been extended for a decade with a three year moratorium period. The loan will be lent at the rate of one month MCLR.
Rajnish Kumar, Chairman, SBI, said that it requires "courage" to lend such a huge amount.
The amount sanctioned is an unprecedented disbursal amount by India's largest public sector bank to any entity.
"This is the largest amount of loan to have been sanctioned to NHAI in one stroke by any institution... The authority had invited an Expression of Interest from Scheduled Commercial Banks to fund Rs 25,000 crore... In response to this EOI, SBI offered to fund the entire requirement of Rs 25000 Crore based on one month MCLR," a statement released by the ministry said.
Kumar said that NHAI has been doing tremendous work and thus there is "no risk" in lending the funds.
"Growth of a country depends on the way it had connectivity," he said.
Kumar added that the MoU with the Authority is to support the entire system built around construction activity.
"When the MoU was being negotiated, we decided that we will take some calculated, limited risk... Considering the state of regulations in the country, it is better to fund NHAI than contractors..." Kumar said.
NHAI is the nodal authority to undertake Modi government's flagship programme Bharatmala. The programme will lead to about 60,000 kilometres of new national highways being built in the country. The overall capital outlay for the programme is Rs 6.92 lakh crore.
Under the first phase of Bharatmala, approved by cabinet last year, 34,800 km of national highways will be constructed over the next five years. These also include 10,000 km of highways under the previous National Highways Development Project (NHDP).
Centre estimates that Rs 5.35 lakh crore will be required till 2022 to successfully complete first phase of Bharatmala.
"Our sector is not cash strapped but only risk averse," Gadkari said adding that road sector is "economically viable and has profitable internal rate of return".
According to the ministry, NHAI has no principal repayment liability for the first three years. Beyond this, the repayment would be done in 14 equal half yearly installments.
"The total loan amount is to be disbursed with 31 March 2019... Interest accrued on the amount actually outstanding will be paid on monthly basis," said the statement.
NHAI can withdraw the amount in any number of tranches.
SBI is the first bank to come forward after Gadkari met various bank chiefs in June to showcase the strides made by the ministry in recent past.
"We will need to evaluate these (projects started before 2014) on a case-to-case basis. I have assured the bankers and the RBI deputy governor, the government will do all that is required to remove the obstacles from our side if there are any. All stakeholders — banks, the government and the NHAI — need to discuss all issues together on a common platform," Gadkari had said after the meeting.
For projects started after 2014, he had said that all the projects Wil only start once 80 percent land acquisition is done thereby reducing chances of the investment turning into a non performing asset.
The union minister has previously said that banks have agreed to lend close to Rs 1.3 lakh crore to support the country's infrastructural needs.
Road ministry has been tapping various sources of funds to finance its pet project. It was alloted Rs 71,000 crore under union budget of 2018-19. Apart from this, NHAI has raised Rs 9,681.5 crore through first tranche of Toll-Operate-Transfer (TOT) bidding.
The authority is due to bring out second package for 577 km od national highways.
Moneycontrol recently reported that NHAI was also exploring options to raise its bond target for the financial year to finance Bharatmala. Presently, it plans to raise Rs 62,000 crore via bond market.