Bank’s got many opportunities from Infrastructure project financing to solve huge loans amount, but it also comes with issues that the banks were facing. It would lead to a higher-end if there were any defaults in the loan repayment. Let us discuss it in detail.
Issues faced by banks
Long Tenure of the loan was the first issue faced by banks like no other loans involving such a long Tenure, so the banks provide infrastructure loans ranging between seven to fifteen years. Because the time involved was so long, the risk involved was also on the higher side. The repayment was coming after a long period to the banks.
The second problem was asset-liability Mismatch as most banks’ deposits are short-term in nature. Hence, whether we talk about saving account deposit, current amount, even the fixed deposits were there for a limited Tenor. Loans are like asset from bank’s and institutions, and it’s charge interest on that. Now, they have to pay for a short period and what they would get back as interest as income was generated after a longer period of time.
So there was an asset-liability Mismatch being created in the whole business scenario.
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