In a significant easing of guidelines for refinancing project loans, where the reworked loan will not be considered a restructured asset, the Reserve Bank of India (RBI) has dropped the threshold for partial take-out financing by new lenders to a minimum of 25% of the outstanding loan from 50% now. The 50% limit was proving to be a hurdle for new lenders to enter a consortium as most of the larger banks were already members.
The central bank has also tried to ensure promoters have enough skin in the game by saying they must bring in additional equity, if needed, to pare the debt and make the debt-equity ratio and debt service coverage ratio acceptable to the banks. Also, the RBI now has no objection to the loan having been restructured in the past as long as it is a standard asset on the books of existing lenders at the time of refinancing.
Vikram Limaye, managing director and CEO, IDFC, observed that the new rules clarified the issue that banks were facing of genuine refinancing being classified as restructured loans. ?The new guidelines will facilitate refinancing,? Limaye told FE.
Recasts will not be treated as restructured assets, either on the books of existing or the new lenders provided the aggregate exposure of all lenders to the project is over Rs 1,000 crore. However, the restructuring facility will be available only once for a project.
MS Raghavan, CMD, IDBI Bank, said the new rules would also make it easier for firms to service the debt.
K Subrahmanyam, executive director, Union Bank, said the fresh norms would enable a host of banks to add exposure to the infra space.
The central bank said the project should have started commercial operations after achieving the date of commencement of commercial operations and the repayment period should be fixed by taking into account the life cycle of and cash flows from the project, and boards of the existing and new banks should be satisfied with the viability of the project. ?The total repayment period should not exceed 85% of the initial economic life of the project/concession period in the case of public-private partnership projects,? the RBI added.
