Calcutta, May 9: Banks and financial institutions have decided not to invest in the equity of the power projects, but stick to project finance and other forms of assistance.

Projects worth Rs 55,000 crore have been identified as those which need financial assistance this year.

“The trend is that more and more banks and financial institutions are opting for project financing and structured products for the power sector. There is a tendency among them to stay away from equity financing,” Chandan Bhattacharya, managing director of State Bank of India, said.

Structured finance entails assembling unique credit configurations to meet the complex fund requirements of large industrial and infrastructure projects. It can be a combination of funded and non-funded facilities, besides credit-enhancement tools like lease contracts.

A 13-bank consortium led by SBI Capital Markets raised Rs 800 crore for North Eastern Electric Power Corporation (Neepco) a few months back. The cash was arranged through structured products.

Banks and financial institutions have also become flexible in their stance on the debt-equity ratio of power projects. “We are not looking at 2:1 ratio. We are ready to go with 3.5:1,” Bhattacharya said.

State Bank has global financial links that it feels can be leveraged to structure solutions that will call for the participation of several loan agencies. Senior officials of IDBI, too, are upbeat on structured finance.

Project financing, too, has become popular. The term covers greenfield industrial plans, capacity expansion, construction ventures or other infrastructure projects.

Capital-intensive business expansion and diversification, besides replacement of equipment, can also be financed through project loans. These loans, spread over five to 10 years, have to serviced at the medium-term prime lending rate.