This story is from September 29, 2006

No clarity: ICICI puts loans on hold

TNN & Agencies / Sep 29, 2006, 03:27 IST

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ICICI Bank on Thursday said it would wait for the govt to remove the cloud of uncertainty surrounding tax-free enclaves before deciding on lending to such projects.

NEW DELHI/MUMBAI: With the SEZ controversy refusing to die down, India's second largest commercial bank ICICI Bank on Thursday said it would wait for the government to remove the cloud of uncertainty surrounding tax-free enclaves before deciding on lending to such projects.
The bank will wait "for the present uncertainty to settle down and for greater clarity to emerge", ICICI Bank CEO and MD K V Kamath said.Kamath's statement comes days after Congress president Sonia Gandhi's comments on farmer displacement due to land acquisition by state governments.
Besides, the Reserve Bank of India had last week decided to link bank loans to SEZs to their real estate exposure a move that is expected to choke credit flow to the zones.
On Thursday, there was a word of caution from PM Manmohan Singh to northern states as well when he asked them to refrain from providing tax sops to the industry.

RBI came in for criticism from commerce minister Kamal Nath for what he said was an "inconsistent approach" toward SEZs. "The RBI in its report had itself termed SEZs as engine of growth," said Nath, whose ministry is of the view that such zones would stimulate investments and earn Rs 44,000 crore in revenues for government in a year.
On the other hand, the finance ministry estimates that the exchequer stands to lose revenues of Rs 1,00,000 crore, which commerce ministry contends is a notional loss since there will be no economic activity if zones do not come up.

Nath has now sought the PM's intervention against the RBI's move which has prompted ICICI Bank to hold back loans. "The Prime Minister is looking at it. I have brought it to his notice," Nath said, while also urging the industry to take up the issue with the central bank.
IMF too came under attack, with Nath saying: "Sitting in Washington, IMF need not give us wisdom. We don't want to be preached by IMF at all." "I am willing for an open debate, but nobody is coming forward.
There are some real concerns, which the government will address. But there are some imaginary concerns also. SEZs are the engines of growth and the government will not allow the regime to be sabotaged."

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