Source:fc: Rajendra Magan Palande Apr 01 2010
Relief to banks in delayed, litigated projects
The Reserve Bank of India (RBI) has relaxed the norms for classification of project
loans to infrastructure ventures as non-performing assets in case of delays for reasons beyond the control of the promoters.
Banks now have the leeway to not treat loans to infrastructure projects under litigation for four years from the original date of start of commercial operations. So far such treatment was allowed for only two years, RBI on Thursday said loans to these projects would be treated as standard loans for up to two more years.
Where projects are delayed for other reasons beyond the control of promoters, RBI has granted additional one year beyond the extension of the date of commencement of commercial operations.
The relaxations were made on the basis of bank representations. “It has been represented to us that there are occasions when the completion of projects is delayed for legal and other extraneous reasons like delays in government approvals, etc. All these factors, which are beyond the control of the promoters, may lead to delays in project implementation and involve restructuring/rescheduling of loans by banks,” RBI said.
The guidelines will not be applicable to restructuring of advances to developers of residential and commercial real estate projects and loans classified as capital market exposure.
For this purpose, RBI has also created two categories of project loans – those given to the infrastructure sector and to the non-infrastructure industrial sector. RBI said project loan would mean any term loan extended for the purpose of setting up an economic venture. Banks must fix a date of commencement of commercial operations at the time of loan sanction or financial closure in the case of multiple banking or consortium arrangements.
No further relaxation has been made in the other category of non-infrastructure industrial loans.
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