Total envisaged cost of projects financed by lenders reached a new high of ₹3.91 lakh crore in FY24: RBI bulletin

The total envisaged cost of the projects financed by banks/financial Institutions (FIs) reached a new high of ₹3.91 lakh crore during 2023-24, with 54 per cent planned to be invested by the year-end, according to an article in RBI’s latest monthly bulletin.

During 2023- 24, about 944 projects got assistance from banks/FIs with a record high total cost of projects of ₹3,90,978 crore, as compared to 547 projects sanctioned during the previous year having total cost of ₹2,66,546 crore, per the article “Private Corporate Investment: Growth in 2023-24 and Outlook for 2024-25” authored by RBI officials Kamal Gupta, Rajesh B Kavediya, Sukti Khandekar and Snigdha Yogindran.

Project pipeline

The phasing profile of the pipeline projects finance suggests that the envisaged capex will increase significantly to ₹2.45 lakh crore in 2024-25 from ₹1.59 lakh crore in 2023-24, the officials said.

They observed that rising domestic demand and capacity utilisation, improved profitability of corporates, sustained credit demand, business optimism and government’s thrust on infrastructure development, along with policy measure to encourage investment activities, bode well for private capital investment.

“Capital investment by private corporates, a major driver of India’s long-term growth, has been gaining traction, after moderating during the Covid-19 pandemic.

“Healthy balance sheet of banks and private companies, improved corporate profits, rising capacity utilisation, sustained credit demand, optimism in business sentiments and government’s thrust on public infrastructure bode well for private capital expenditure (capex) cycle, which reflects investment climate and growth potential of the economy and facilitates economic progress,” the officials said.

Phasing plans

The size-wise distribution of projects showed a noticeable increase in the number of projects across various sizes. During 2023-24, eleven mega projects (with project cost ₹5,000 crore and above) and 77 large projects (₹1000 crore-₹5000 crore), got sanctioned by banks/FIs, having share of 21.7 per cent and 37.1 per cent of total project costs, respectively.

Any deviations from the phasing plans of these mega/large projects can affect the overall capex pattern in the medium-term, the authors said.

They noted that investment in green field (new) projects accounted for the lion share of about 89 per cent in the total cost of projects financed by banks/FIs during 2023- 24, in line with the recent trends, which points to likely capacity expansion by private corporates going forward. Investment in expansion and modernisation of existing projects accounted for 8.6 per cent share in the total project cost

Project distribution

Industry-wise distribution of projects sanctioned during 2023-24 indicates that the infrastructure sector4 remained the major sector accounting for 55.5 per cent share in the total cost of projects, primarily driven by investment in ‘Roads & bridges’ and ‘Power’ .

Beside infrastructure, among the other major industries, metal & metal products, construction, electrical equipments, and food products also accounted for a sizable share in the total cost of projects.

The state-wise distribution of projects sanctioned revealed that the top five states — Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Uttar Pradesh — together accounted for about 55 per cent of the total cost of projects sanctioned during 2023-24.