Chief Economic Adviser KV Subramanian on 9th of March stated that the financial sector will have to play a crucial role in the infrastructure lending and this needs specialized expertise.
Speaking at a webinar organized by FICCI, Subramanian said that for India to become a $5 trillion economy, capital allocation to the infrastructure sector should be of high quality.
"Capital allocation to the infrastructure sector has to be of high quality and the financial sector
has an important role in this regard. The financial sector should refrain from resorting to crony lending, which would put the brakes on lending and the economy will suffer," he said.
Subramanian said the operational aspects of different projects are different. "Once a loan goes into distress, it blocks capital for credit-worthy borrowers. In such a scenario, the lenders will have to take complete responsibility."
He said that the country is placing emphasis on growth through infrastructure.
"This places responsibility on the financial sector. The sector has to see that there should not be a sub-optimal allocation of capital. Even if distress takes place, the right things have to be done. Analytics can be used to identify crony lending," he said.
The senior management of the financial institutions would have to incentivize to prevent crony lending, Subramanian said.
"Incentive mechanisms need to be put in place to prevent crony lending as infrastructure projects involve high gestation periods," he added.
