SBI has introduced a new clause in the loan document which enables the bank to burden the borrower with any increase in cost resulting from implementation of new regulations. The borrowers, particularly infrastructure developers have raised a concern against the move. If any change in regulations requires SBI to raise the cost, the bank will have the liberty to pass on the burden to the borrower.
Even if the bank has allotted a loan at a particular interest rate, it will be able to increase the rate later on provided if any regulations require it to do so. Earlier this month, RBI has issued guidelines for project loans, instructing banks to set aside 5% as provisions for infrastructure and commercial real estate which are under construction. Earlier, banks used to set aside just 1% as provisions for real estate projects. Banks including SBI have suggested RBI to relax the norms as they may make it difficult for infrastructure firms to bid for new projects. The Ministry of Roads, Transport & Highways has voiced its concern for maintaining stability in the project lending rates by banks. The ministry is particularly concerned that the pace and cost of infrastructure creation should not be impacted at any cost. Ministry officials said that RBI should take due care to ensure viability of road projects is not hampered.
