In India, banks and financial institutions are conventional sources of infrastructure finance. Until recently, PSUs accounted for almost all of power sector exposures of banks and FIs. However, this trend is changing and with recent reforms paving way for greater private sector participation, banks are witnessing a sudden flurry of long term and working capital lending for Independent Power Producers (IPPs) in the last 3-4 years. Despite substantial revisions of internal exposure limits, by banks and FIs, to infrastructure and power, financing IPPs continues to be significantly constrained by limits both prudential and preferential. Moreover, PSU power companies, infused with fresh equity, are competing in the open market for already scarce financial resources. In these circumstances, IPPs are facing teething issues in securing both long term and cash credit, from conventional sources.
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