Banks & intangible assets

.......Much more is at stake here. Implicit in RBI’s instruction to banks is the principle of lending to and on the back of all intangible and knowledge assets. Contrary to the Kingfisher case, RBI recently permitted banks to finance telecom companies bidding for spectrum. This move followed the government’s decision to allow telecom companies bidding for airwaves to mortgage spectrum to raise funds from banks. By permitting banks to finance investments in an intangible asset such as spectrum and seeking bank’s recourse to it in the event of a default, RBI had moved forward on intangible asset financing. Now, with the diktat in the Kingfisher Airlines case, what comes through is that the regulator itself is not clear about how to address the issue of funding intangible assets; not only the prudential norms or provisioning requirements but also the financing of these assets. This issue is important in light of the changing structure of the Indian economy and its new sources of growth........

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