SEZ – a risky affair
With SEZs all set to sprout up like mushrooms, how do banks rate them? Should banks be liberal in financing SEZs or units in SEZ? The RBI does not seem to think so. RBI thinks that it is as good or as bad as exposure to commercial real estate. In a letter addressed to all commercial banks yesterday, the RBI cautions the banks,
Keeping in view the current market conditions, it has been decided that the exposure of banks to entities for setting up Special Economic Zones (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 and banks would have to make provisions as also assign appropriate risk weights for such exposures as per the existing guidelines.