Project Financing in India

By Shruthi D PShruti Tolanur

Project Financing Project financing refers to the means of finance employed for meeting the cost of project.- Prasanna ChandraProject finance is a method of financing very large capital intensive projects, with long gestation period, where the lenders rely on the assets created for the project as security and the cash flow generated by the project as source of funds for repaying their dues.

Project Financing contdProject finance is essentially financing on the security of the project itself, with limited or no recourse against the sponsors of the project or other parties involved in the development and implementation of the project.

Due to such characteristics of project finance, the loans sought by the borrowers are always approved by the lenders on the basis of strong in-house appraisal of the cost and viability of the ventures as well as the credit standing of project promoters.

Means of FinanceThe long term source of finance for meeting the cost of projectEquity CapitalPreference CapitalNon convertible DebenturesConvertible DebenturesRupee Term LoansForeign currency Term LoansEuroissues

Means of Finance contdDeferred creditBilling rediscounting schemeSuppliers line of creditSeed capital assistanceGovernment SubsidiesSales tax deferment and exemptionUnsecured loans & depositsLease and hire purchase finance

Norms and Policies of Financial InstitutionsRaising of ResourcesExposure Norms

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