A Model for Risk-based Pricing of Infrastructure Financing by Banks

Ajay Pathak

The IUP Journal of Bank Management, 2005, vol. IV, issue 4, 43-53

Abstract: Infrastructure development is the new buzzword in India. Policymakers are emphasizing on the development of roads, ports, airports, and urban infrastructure to facilitate growth. The government is opening up to private investments in the infrastructure sector through Special Purpose Vehicles (SPV). However, in spite of the changing regulations, infrastructure finance has still been untouched by commercial banks. But this could be the new avenue to gear up their fund-based activities. With increased exposure to infrastructure, banks need to be cautious about the credit risks inherent in the projects with long gestation periods. It was found that infrastructure development has a high correlation with macroeconomic factors like the GDP growth rate of the country. Such macroeconomic trends influence income generation and timely recovery of the credit extended. Keeping this factor in mind, a model pricing mechanism has been developed for greater risk sensitivity in order to address macroeconomic changes and ensure better risk management in the economy.

Date: 2005
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjbm:v:04:y:2005:i:4:p:43-53

Access Statistics for this article

More articles in The IUP Journal of Bank Management from IUP Publications
Bibliographic data for series maintained by G R K Murty ().