Banking & Financial Services
Minor reprieve for infra loan restructuring
RBI allows repeated restructuring of infrastructure loans subject to conditions
The RBI today allowed the infrastructure loans to be restructured repeatedly subject to certain conditions and retain standard assets status even if the asset has already been restructured once in line with its earlier guidelines declared on May 30, 2013.
The extant guidelines as per earlier norms
In its earlier guidelines dated May 30, 2013, the RBI had stated that revisions of the date of commencement of commercial operations (DCCO) and consequential shift in repayment schedule for equal or shorter duration (including the start date and end date of revised repayment schedule) will not be treated as restructuring provided that:
n The revised DCCO falls within the period of two years and one year from the original DCCO stipulated at the time of financial closure for infrastructure projects and non-infrastructure projects respectively; and,
n All other terms and conditions of the loan remain unchanged.
The key word here is “consequential shift in repayment schedule”. Such loans would attract normal 0.4% provisions. If there is any“restructuring or reschedulement of loans” due to change in DCCO, then the provisions would be 4.25% in FY15 and 5% in FY16.
What has changed?
Further, banks may restructure such loans, subject to the extant prudential norms on restructuring of advances, by way of revision of DCCO beyond the time limits quoted as above and retain the ‘standard’ asset classification, if the fresh DCCO is fixed within the following limits, and the account continues to be serviced as per the restructured terms:
n Infrastructure Projects involving court cases
Up to another two years (beyond the two year period quoted at paragraph 2(a) above, i.e., total extension of four years), in case the reason for extension of DCCO is arbitration proceedings or a court case.
n Infrastructure Projects delayed for other reasons beyond the control of promoters
Up to another one year (beyond the two year period quoted at paragraph 2(a) above, i.e., total extension of three years), in case the reason for extension of DCCO is beyond the control of promoters (other than court cases)
n Project Loans for Non-Infrastructure Sector (Other than Commercial Real Estate)
Up to another one year (beyond the one year period quoted at paragraph 2(a) above, i.e., total extension of two years)
Thus, only for loans where there is a repeated change in DCCO and “shift in the repayment schedule” only for the above mentioned reasons, the provision would remain at 0.4%.
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