The Reserve Bank on Monday issued new refinancing norms for infrastructure and core sector projects. Accordingly, the banks will be allowed to flexibly structure the existing project loans to these sectors with the option to periodically refinance the same.
The Reserve Bank (RBI) on Monday issued new norms for long term project loans to infrastructure and core industries. Accordingly, the banks will be allowed to flexibly structure the existing project loans to these sectors with the option to periodically refinance the same as per the below mentioned norms:
*Only term loans to projects exceeding Rs 500 crore will qualify for flexible structuring and refinancing
*Banks may fix a fresh loan amortisation schedule for existing project loans once during the life time of the project provided the loan is a standard loan and net present value of the loan remains same before and after the change in loan amortisation schedule
*If project term loan becomes non-performing, further refinancing should stop
*Lenders can periodically refinance existing project loans
*Banks may determine the pricing of the loans at each stage of the project term loan or refinancing debt facility
*Banks should recognise from a risk management perspective that there will be a probability that the loan will not be refinanced by other banks, and should take this into account when estimating liquidity needs as well as stress scenarios