The Reserve Bank Friday allowed non-banking financial companies (NBFCs) to restructure project loans and continue treating them as standard advances in cases where projects have not commenced operations due to external factors.
The move comes after the central bank last month permitted banks to recast infra project loans.
“NBFCs may restructure loans subject to the extant prudential norms on restructuring of advances, by way of revision of DCCO (date of commencement of commercial operations)…and retain the ‘standard’ asset classification,” the apex bank said in a notification this evening.
However, the regulator clarified that the facility can be used only in select scenarios. These include infra projects involving court cases, where a loan by an NBFC can be restructured for up to four years from the original DCCO.
Besides, in infra projects delayed for reasons beyond the control of promoters, an NBFC can use the restructuring route for up to three years from the original DCCO.
For project loans to the non-infrastructure sector, excluding commercial real estate, the total extension granted is two years, the notification said.
It can be noted that restructuring as an activity is slated to end after April 1. The NBFCs have also been allowed to fund cost overruns in projects with certain riders.
“In cases where the initial financial closure does not envisage such financing of cost overruns, NBFCs have been allowed to fund cost overruns, which may arise on account of extension of DCCO within the time limits quoted in the above, without treating the loans as ‘restructured asset’,” it said.
NBFCs may fund additional interest during construction which may arise on account of delay in completion of a project, the RBI said.
On December 15 last the RBI amended norms to give more flexibility to banks to restructure infra loans by changing the 5:25 rules, with a view to revive stalled plans and help banks tide over mounting bad loans.
The new guideline widened the scope of 5:25 scheme by including existing standard long-term project loans worth over Rs 500 crore to be flexibly structured and refinanced.
In July, the RBI had allowed flexibility in structuring project loans only to new loans to infrastructure and core industries plans.