The proposals for project finance would be considered by the bank on a selective basis in view of the larger outlay of funds an longer duration of credit which may have an adverse impact on bank's Asset-Liability Management system and strain on its liquidity. Usually such projects would be operationalised through consortium arrangement along with the Term Lending Financial Institutions and other public/ private sector Banks.
The project would be appraised by the Lead Bank of the consortium and all other banks would accept the appraisal made by the lead bank. If required, the assistance of the professionals in the line/ project appraisal groups of FIS/ Commercial Banks would be obtained for the appraisal.
Before extending finance for Projects, the economic feasibility an financial viability of the project in relation to the macro economic conditions prevailing at the time of conceptualisation of the project and also the likely scenario that may prevail during the normal life span of the project should be established. The project should be able to withstand reasonable levels of variation in crucial parameters which should be established by sensitivity analysis of the cash flows.
The means of finance for the project alongwith provisions to meet contingencies such as cost/ time overrun should be established. The entire source of funds for the project from sources otherthan that by the promoters shall be fully tied-up before sanction/ disbursement of the limits.
Wherever the project is one of unusually longer duration such as infrastructure development, the involvement of agencies such as Financial Institutions and ways of reducing the blockage of bank's fund that are sourced mainly out of short term lending institutions, take-out financing, securatisation, Inter-Bank participation Certificates, etc. would be resorted to.
The disbursements under project Finance would be made strictly in tune with the sanction terms, only after ensuring the end use of funds already disbursed by the consortium, meeting the required margin at each stage of project implementation and certification by the competent consultants/ specialists as per the procedure in vogue from time to time and as decided by the consortium.
The rate of interest on such credit facilities would be determined based on the borrower gradation and the interest rate policy of the bank from time to time.
The credit facilities shall be secured by tangible assets and collaterals as may be required based on the nature of project, quantum and duration of the credit, anticipated return on investment and risk perception.
In addition to the above, Bank's usual normal lending norms and policy guidelines in force from time to time would be equally applicable to project finance cases also.