Will IDBI be God Father to all of moviedom?

IDBI will have to enlarge its scope to fund the medium budget films and also take the risk of financing new projects without face value. And to fund medium budget films, the banks will have to make the scope for it in a manner whereby they get finances without undue hassles

THE Infrastructure Development Finance Corporation has estimated revenue projection for the film industry at Rs 33,984 core in 2005 as against the current Rs 11,430 crore this year. It has stated that the industry has high revenue growth potential, and has pegged revenue potential for 2002 at Rs 15,332 crore, and for 2004 at a healthy Rs 24,858 crore. The media and entertainment world have an export market of Rs 14,700 crore by 2005. Television reaches 70 million households in India today but by 2005 it is expected to reach 98 million.

Hence the Industrial Development Bank of India’s proposal to finance the film industry comes at an appropriate time. The IDBI has set up a committee consisting of Yash Chopra, Mani Ratnam, Aparna Sen, Bhupen Hazarika and others who will guide it to which film producer should be financed. However, it is yet to draw up a guideline on the basis of which the banks would finance the industry. It may be noted that the Indian Bank Association has also prepared a comprehensive report to categorically suggest that banks can take the risk of financing the film industry including the production, distribution and exhibition sectors, apart from funding studios and laboratories for their machineries.

By the time the report was submitted Sushma Swaraj had left the ministry of information and broadcasting, but now she is back and should consider this report too. But in the absence of a proper guideline it is difficult for a normal producer to comprehend whether he can have institutional finance for his films.

Come to think of it, who wouldn’t wish to have finance from the banks since their interest rates amount to a mere half of what a film financier charges? One has to remember that 95 per cent of the producers need bank finance and the new committee set up by the IDBI will have to address itself to this large segment. The banks would not mind funding Yash Chopra, Subhash Ghai, Yash Johar, Sanjay Leela Bhansali, Rakesh Roshan and film companies that have become corporate entities already, such as Tips. But from others, the banks will obviously seek collateral security. Banks are within their rights to safeguard their investment. But they will have to adopt a different method of financing films if they want to reach out to the larger segment of the film industry and keep the growth rates high. Merely funding a handful of filmmakers who have proved their worth and credibility in the film market should not be the adopted policy. It has to come up in the open market and play decisive a role in funding the larger section of the film industry if its intentions are to cleanse the film industry from the money lenders of different hues. Sushma Swaraj, minister for information and broadcasting, is very keen that the IDBI should fund films so that producers are out of the clutches of the money-lending sharks. But, filmmaking is a different ball game altogether.

Films are never made on the lines of factory. Each film has its individual entity and merit no matter who makes them or who stars in them. A hit filmmaker can fail in his next attempt or vice versa. So to depend merely on the winning horse does not serve the purpose because the industry is made of different classes of film makers. The IDBI will have to enlarge its scope to fund the medium budget films and also take the risk of financing new projects without face value. And to fund medium budget films, the banks will have to make the scope for it in a manner whereby they get finances without undue hassles.

What most producers have been demanding is that the banks should finance the industry with the negatives and distribution rights, including overseas and copyright such as music and satellite being construed as collateral security, rather than the traditional immovable property. The industry is not asking for the moon. But considering the high risk factors, banks will have to adopt a different strategy for the film industry which will serve as a guideline. There is no denying the fact that the film producers will have to be a lot more organised and transparent in all their dealings.

Amit Khanna:
Banks should fund everyone
"Bank finance is for everyone who wishes to avail of it. The question of what the collateral security should be is still to be worked out by the IDBI. It takes time but it will be worked out. Hopefully it will be done soon," says Amit Khanna.

Lawrence D’Souza
It’s welcome news
"That the IDBI is considering lending money for film production is a good thing to happen to the industry. However I feel that instead of the bank insisting on collateral security of landed property, they should also adopt the practice of the film financiers in mortgaging the negative, or considering the distribution and copyright of music and satellite rights as collateral security. They can also take the letter from laboratory that they will not part with the negative or positive without the consent of the concerned bank. I think this should become the acceptable norm with the bank," says Lawrence D’Souza.

Pramod Chakraborty:
Producers’ credibility is important
"I know that without any security no bank will finance the film industry. Everybody can’t get bank loans because there are people in the industry who take loans and don’t pay back the same. But there are those who do. So there is no one standard that can be applied to judge all the filmmakers. The whole system has changed. There are distributors who do not honour their contracted amount. At the last minute, while taking delivery, they force producers to reduce the price. So what can one do in such a circumstance? The film industry can’t be judged with other industries or factories. Banks should first go by the standing of the producer in the film industry and the films that he has made."

Ashok Thakeria:
Committee’s advice is crucial
"The best thing that the IDBI has done is to appoint a committee consisting of film people who understand film business and filmmaking. They are the best judges on deciding whom to give loans to, whereby the banks are secured. Till the banks get accustomed to the functioning of the film industry, the committee’s advice will be essential. After all, banks do not lend money without the security. Recently Subhash Ghai had held a seminar on institutional finance for films in which everything was discussed. If banks lend money, the costs of production will go down as the interest rates will come down. The lending rates of interest is controlled and fixed by the Reserve Bank of India, and as such, the banks cannot either reduce or increase the rates at random. The borrower should know that nobody will lend money without securing himself. So also the banks," says Thakeria.
MSM Desai