Mumbai: The Reserve Bank of India has directed banks to treat loans to Special Economic Zones on par with lending to real estate sector, a development that could prove to be a dampener in India Inc's rush to set up SEZs.
"Keeping in view the current market conditions, it has been decided that the exposure of banks to entities for setting up SEZs or for acquisition of units in SEZs, which includes real estate, would be treated as exposure to commercial real estate sector with immediate effect," the central bank said in a notification.
Banks would also have to make provisions as also assign appropriate risk weights for such exposures as per the existing guidelines, the notification said.
The RBI decision is aimed at limiting the exposure of commercial banks to SEZs and could also lead to increase in interest rates for such projects as real estate funding carries a higher risk weight.
Exposure to real estate includes lending to office buildings, retail space, residential buildings, commercial premises, industries and hotels.
The central bank had in its annual report last month also raised concern on the SEZ scheme, saying it could result in uneven economic development in the country.
"There are concerns that SEZs could aggravate the uneven pattern of development by pulling out resources from less developed areas. Revenue implications of taxation benefits would also need to be factored. The revenue loss may be justified only if SEZ units ensure forward and backward linkages with domestic economy," the RBI had said last month.
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