the infrastructure requirements of a growing indian economy. it is worth highlighting that outstanding bank credit to the infrastructure sector, which stood at rs. 72. 43 billion in 1999 – 2000, has increased steadily to rs. 7860. 45 bn in 2012 – 13, a compounded annual bis central bankers ’ speeches growth rate ( cagr ) of 43. 41 per cent over the last thirteen years ( table 1 ) against an overall cagr of bank finance to all industries at 20. 38 per cent during the same period. the share of bank finance to infrastructure in gross bank credit has increased from 1. 63 per cent in 2001 to 13. 37 per cent in 2013. between march 2008 and 2013 alone, banks ’ exposure to infrastructure has grown by more than 3 times. this apart, credit has also flown into infrastructure sector via nbfcs, mutual funds and capital markets, the source of bulk of which is bank finance. it may not, therefore, be correct to argue that lack of finance from banks has constrained the development of the infrastructure sector. 9. in fact, recognizing the importance of infrastructural development in the country, rbi has provided certain concessions / relaxations in lending to infrastructure sector, such as, enhancement in single / group borrower limits, permission to issue guarantees favoring other lending institutions in respect of infrastructure projects, asset classification benefits under restructuring guidelines and permission to extend finance for funding promoter ’ s equity, subject to certain conditions. in order to encourage lending by banks to the infrastructure sector, banks are permitted to finance spvs registered under the companies act, set up for financing infrastructure projects, after ensuring that these loans / investments are not used for financing the budget of state governments. 1 rbi, in a recent circular ( march 18, 2013 ), has allowed the debts due to the lenders in case of public - private partnership ( ppp ) projects to be considered as secured to the extent assured by the project authority in terms of the concession agreement, subject to certain conditions. impaired assets in infrastructure sector 10. the evidence, thus, clearly suggests that banks have been substantially financing infrastructure projects in the country notwithstanding the inadequate commercialization of projects due to regulatory, political and legal constraints and total absence or insufficiency of user charges in many sectors. of course, this has not been without a fair share of pain for them. the npas and the restructured assets in this segment have increased quite substantially of late. the gross npas and restructured

india dated securities 4, the mutual funds held 0. 9 per cent as at end december 2010, which dropped to 0. 2 per cent as at end march 2011. the average holding of government securities by the mutual funds during the last two years remained at 0. 6 per cent as against 38. 7 per cent by the banks, 22. 4 per cent by insurance companies, 8. 9 per cent by pds, 6. 7 per cent by pfs, 3. 1 per cent by corporate entities. during the current calendar year till end of may, the average share of mutual funds in the secondary g - sec market remained at 5. 8 per cent of the total traded volume. one possible reason for the lower level of participation of mutual funds in the g - sec market is lack of investor interest in the gilt - oriented mutual funds due to significant interest rate risks. iii. future role and regulatory issues there is a need for mutual funds, especially gilt funds, to complement the role of pds in promoting retail holding in government securities. mutual funds are supposed to tap retail investors, who in turn, to the extent that they have long horizons, provide stability to the market. they also benefit small investors by providing them access to risk - free gilt edged securities. the mutual funds are allowed to participate in the interest rate swap ( irs ) market for the purpose of hedging their own balance sheet risks. however, their participation has remained quite muted. the irs market, although very liquid, suffers from a low customer base of around 1 per cent. the mutual funds may increase the use of irs for hedging their interest rate risk which would help in broadening and deepening of the irs market. source : amfi monthly – may 2011. source : amfi monthly – may 2011. source : nsdl. rs. 23. 3 lakh crore as on december 31, 2010 ; rs. 23. 5 lakh crore as on march 31, 2011. bis central bankers ’ speeches mutual funds are also allowed by sebi to trade on interest rate futures ( irf ). irf contracts on 10 - year notional coupon bonds were launched on nse in august 2009. the product witnessed significant activity during the initial period, but liquidity tapered off subsequently. rbi has already issued guidelines for futures contracts on 91 - day t - bills, which are expected to be introduced shortly. rbi is also considering introduction of irf contracts on 2 - year