Banks can finance Rs 10-crore-plus movies

Mumbai: The Reserve Bank of India (RBI) has allowed banks to finance film projects costing over Rs 10 crore. This follows the RBIs withdrawal of the earlier stipulation that banks should not finance projects where the total cost of film production exceeds Rs 10 crore.

The RBI has said the board of directors of banks should fix an overall exposure limit to the film industry and ensure that advances are distributed over a reasonable number of films so that the risk is adequately spread.

It was in May 2001 that the RBI had originally notified guidelines stating that banks can take exposure up to a maximum of 50 per cent of the total production cost of a film.

The RBI had stipulated that a trust and retention account (TRA) must be maintained for all capital as well as revenue inflows and outflows. Receivables on sale of all intellectual property rights should be credited to the TRA and a no-objection certificate will be required from all parties concerned. The lenders will have the first charge on the account.