Banks can treat exposure to PPP infra projects as secured: RBI

To encourage funding to infrastructure projects, the Reserve Bank of India (RBI) said banks could consider loans to such projects under the public-private partnership (PPP) mode as secured exposure.

However, it has put some conditions for this. The toll, rates and payments should be kept in an escrow account. The lenders will have priority over concessionaires to withdraw money from such accounts, said RBI in a communication to banks.

Lenders must ensure sufficient risk mitigation through provisions such as pre-determined increase in user charges. There has to be provision for increasing the concession period when the earnings (from the project) are lower than anticipated.

RBI gave banks the right to substitute the concessionaire or right to trigger termination in case of default in debt service.