RBI eases refinancing norms for infrastructure loans

Banks can now flexibly structure existing project loans to infrastructure and core industries

RBI said that banks could refinance the project term loan periodically after the project has commenced commercial operations.

The Reserve Bank of India (RBI), on Monday, allowed banks to flexibly structure the existing project loans — to infrastructure and core industries — with the option to periodically refinance them.

Earlier, this option of periodic refinancing was available only to new loans in these segments.

“Only term loans to projects, in which the aggregate exposure of all institutional lenders exceeds Rs.500 crore, in the infrastructure sector and in the core industries sector will qualify for such flexible structuring and refinancing,’’ the RBI said in a notification to all banks.

The RBI said banks were representing this issue, “as it would ensure long-term viability of existing infrastructure/core industries sector projects by aligning the debt repayment obligations with cash flows generated during their economic life.”

Banks were asked to fix a fresh loan amortisation schedule for the existing project loans once during the life time of the project, after the date of commencement of commercial operations (DCCO), based on the reassessment of the project cash flows, without this being treated as ‘restructuring’.

The RBI also said the viability of the project is re-assessed by the bank and vetted by the Independent Evaluation Committee. RBI said that banks could refinance the project term loan periodically (say 5 to 7 years) after the project has commenced commercial operations.

The refinance could be taken up by the same lender or a set of new lenders, or combination of both, or by issue of corporate bond, as refinancing debt facility, and “such refinancing may repeat till the end of the fresh loan amortisation schedule.’’

The RBI also said that banks could also provide longer loan amortisation as per the flexible structuring of project loans to existing project loans to infrastructure and core industries projects which are classified as ‘non-performing assets’ (NPAs).

However, the central bank said, these loans would be treated as ‘restructuring’ and the assets would continue to be treated as ‘non-performing asset’.