Since the bank's advance portfolio is now pegged at around Rs 75,000 crore, once the policy is approved, the State Bank will be able to extend additional term loans of Rs 3,750 crore to the infrastructure sector. At present, term loans account for about 24 per cent of the bank's loan portfolio.

Confirming the development, managing director and group executive (corporate banking) V Janakirman said: "The focus is on infrastructure lending which is the sunrise sector. The bank has sanctioned loans worth Rs 5,600 crore to 41 projects involving a project cost of Rs 85,000 crore." Sanctions worth Rs 5,600 crore include in-principle approvals as well.

Apart from this fund-based exposure, the bank has committedanother Rs 2,900 crore worth of non-fund based exposure, taking its total core sector sanctions to Rs 8,500 crore in fiscal 1999. The power sector accounts for the lion's share of the sanctions (Rs 5,900 crore) followed by telecom, oil, roads and ports.

According to Janakirman, the bank is expected to sanction about Rs 2,600 crore for core sector lendings in 1999-2000 by which year SBI's cumulative disbursements to infrastructure would be Rs 2,200 crore.

In addition to the advances, the bank's investment wing is likely to pump in funds in the core sector by subscribing to debentures of long-gestation projects.

The Rakesh Mohan committee on infrastructure financing has estimated the requirement for infrastructure financing by the end of the 9th Plan period (2002) at Rs 36,00,000 crore, of which domestic rupee debt will account for about Rs 1,16,000 crore.

However, according to senior bankers, between Rs 60,000 and Rs 70,000 crore worth of rupee debt will be available for core-sector projects by 2002.The State Bank's share in core sector rupee lending is likely to be in the range of 16-20 per cent, Janakirman said.

Industry analysts have ruled out any fierce competition between banks and financial institutions for the term-loan segment "as there will be enough business for every body". "We may see undercutting in lending rates... And naturally the bank will be in a better position to offer cheaper rates as it has access to cheap funds. However, there will be no serious poaching as the pie is too big for all players to have a share in it," said a senior core-sector analyst.

The State Bank managing director does not see any asset-liability mismatches triggered by the creation of long-term assets. "We have taken every thing into account before taking a conscious decision to push infrastructure lending. The savings deposits which account for about 25 per cent of the bank's total deposit base is a steady source of funds," he said.

The bank may also explore the possibility of entering into takeout dealswith Infrastructure Development Finance Corporation to avoid asset-liability mismatches. The other possible avenues are securitisation of loans and floatation of credit derivatives for risk sharing with other banks. The State Bank can also float a subordinated debt issue to meet its long-term fund requirements.