Mumbai, Sept. 26: Banks are focusing on the nature of projects while funding special economic zones (SEZ) rather than the entity promoting it.

Last week, the Reserve Bank of India (RBI) ruled that exposure of banks to entities for setting up SEZs, which include real estate, would be treated as exposure to the commercial real estate sector with immediate effect. Banks would have to make provisions and assign appropriate risk weights for such exposures according to the existing guidelines, the directive said.

As a result, banks will have to earmark more capital and make extra provisioning for such exposures.

At a conference organised by Ficci and Indian Banks’ Association (IBA) here, senior bankers, while admitting that the RBI directive will make loans for SEZ projects costlier, added that they will pay more attention to the nature of the SEZ rather than the entity which is setting it up.

SBI managing director T.S. Bhattacharya said though the bank will look at SEZ proposals, importance will be given to those that have industry-specific projects such as software or textiles. “These projects should have clearly identifiable sectors and there should be downstream or upstream benefits that come from them,” he said.