Banks allowed to fund films up to
Rs 100 million
The Reserve Bank of India on Monday issued guidelines to commercial banks on funding Bombay's Bollywood film industry, but capped their exposure to such projects at Rs 100 million in view of its risky nature.
India's prolific movie industry has for years relied on the pockets of private individuals for finance. Domestic media has speculated widely that the lack of institutional funding has drawn the underworld into the business of financing some films.
The guidelines come after Finance Minister Yashwant Sinha said in his 2001-02 budget speech that the film industry had emerged as an important segment of the economy, thus laying the ground for institutional lending to movie makers.
"Banks are free to provide loans to film producers -- corporate as well as non corporate entities -- with a good track record," an RBI statement said.
The RBI also said banks can finance up to 50 per cent of the total project cost, while the remaining funds have to be brought in by the producers. It said banks could decide on the maturity of the loans.
The RBI advised banks to appoint specialized agencies to monitor and evaluate film projects.
Film makers were cautious about the new guidelines, saying that banks needed to acquire the needed expertise before lending to film projects.
"The banks have to understand the film business. They should appoint a committee with members from leading film industry associations to advise on the viability of a project," Pahlaj Nihalani, president of the Association of Motion Pictures and TV Programme Producers, said.
India's film industry went through tough times last year after Indian police arrested Nazim Risvi, producer of a star-studded production, Chori Chori Chupke Chupke, accusing him of having links with the underworld.
Its financial backer, diamond merchant Bharat Shah, was arrested in January in connection with the funding of the film.
Both Rizvi and Shah, who were arrested by Bombay's police under a provincial law dealing with organised crime are in custody.
The two say they are innocent of any wrongdoing.
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