IDBI has doubled its film financing exposure limit as it is getting a huge demand from corporatised film makers for formal funding.
The limit was increased to Rs 200 crore (Rs 2 billion) last month from Rs 100 crore (Rs 1 billion) set when the bank had begun financing film production in the year 2001.
"IDBI had kept a sectoral cap of Rs 100 crore for overall exposure to the film industry. After getting a good response from the film industry, this limit has been enhanced to Rs 200 crore," said Jitender Balakrishnan, executive director, IDBI.
Entry of more players into Bollywood coupled with increasing corporatisation of the film industry has seen a rise in demand for funds from IDBI.
"Most film production companies are family-owned and, therefore, rely heavily on informal sources. However, in recent times, some film producers like Mukta Arts Ltd, Pritish Nandy Communications Ltd, Padmalaya Telefilms Ltd, UTV and ZEE Telefilms Ltd have become corporatised and are able to raise
funds for meeting their film financing requirements," said Balakrishnan.
"At present, majority of the film producers continue to rely on the unorganised sector for obtaining funds for their films. Therefore, there is a vast market, which is yet to receive funds from the banking sector." he added.
IDBI's model for film financing is based on certain parameters such as producers' track records and debt-equity ratio of 1:1.
India is the single largest producer of films clocking an average of 800 films in different languages every year. Despite that the Indian film industry does not have the 'studio system' that is in vogue in Hollywood.
According to the Reserve Bank of India guidelines, banks can take exposure up to a maximum of 50 per cent of the total production cost of a film. The total project cost itself has to be not more than Rs 10 crore (Rs 100 million).
The exposure, in normal cases, should be 35-40 per cent, but could go up to 50 per cent in special cases.