The banking regulatory body, Reserve Bank of India (RBI) has allowed the banks to take telecom spectrum as collateral for loans issued to telecommunications companies. The new norm is suggested to help the telecom companies to amass funds required for future spectrum auctions.

The banks would be allowed to sell the spectrum, if the companies default on their loans. The state owned lender, State Bank of India (SBI) feels telecom to be a safe area as the bank doesn't have any NPAs from the sector.

"All the loans which we have given are to large well known corporates against their group guarantees. We have no problem. There is not a single NPA in the telecom sector and in the 2G sector in this bank or for any other banking system," said Mr. Santosh Nayar, Dy. MD Corporate Banking, SBI.

However, he maintained that the collateral alone would not be an assessment criterion for the loan; the bank would consider the cash flows as well.