 "RBI relaxes norms of refinancing long term project loans")
The RBI today said banks may refinance long term project loans with certain new riders including taking-over of a minimum of 25% of an outstanding loan from the prior condition of 50%.
"...In respect of existing project loans, it has been decided that banks may refinance such loans by way of full or partial take-out financing, even without a pre-determined agreement with other banks or financial institutions and fix a longer repayment period, and the same would not be considered as restructuring in the books of the existing as well as taking over lenders," RBI said in a notification.
The new arrangement will be applicable on conditions that a minimum of 25% of the outstanding loan should be taken over in case of partial take-out; minimum Rs 1,000 crore aggregate exposure of all institutional; loan be standard at time of refinancing and project should have started commercial operation after achieving date of commencement of commercial operation (DCCO).
Repayment period not exceeding 85% of the initial economic life of the project or concession period in the case of PPP projects, bringing additional equity from promoters, if needed, to reduce the debt, are a few other conditions.
However, earlier banks were allowed to refinance such loans only if more than 50% of outstanding loan were taken over; loans were standard in books of existing banks and were not restructured in past; and repayment period were fixed according to life cycle and cash flow from project.
RBI said feedback from banks showed that the condition of taking over more than 50% of the outstanding loan was difficult to achieve, as a significant number of banks were also part of the consortium lending of such projects, RBI said.
Therefore, RBI said that it has decided that banks may refinance such loans by way of full or partial take-out financing.
"...In respect of existing project loans, it has been decided that banks may refinance such loans by way of full or partial take-out financing, even without a pre-determined agreement with other banks or financial institutions and fix a longer repayment period, and the same would not be considered as restructuring in the books of the existing as well as taking over lenders," RBI said in a notification.
The new arrangement will be applicable on conditions that a minimum of 25% of the outstanding loan should be taken over in case of partial take-out; minimum Rs 1,000 crore aggregate exposure of all institutional; loan be standard at time of refinancing and project should have started commercial operation after achieving date of commencement of commercial operation (DCCO).
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Other conditions include, fixing repayment period based on life cycle and cash flow from project and upon satisfaction from boards of existing and new banks about project viability.
Repayment period not exceeding 85% of the initial economic life of the project or concession period in the case of PPP projects, bringing additional equity from promoters, if needed, to reduce the debt, are a few other conditions.
However, earlier banks were allowed to refinance such loans only if more than 50% of outstanding loan were taken over; loans were standard in books of existing banks and were not restructured in past; and repayment period were fixed according to life cycle and cash flow from project.
RBI said feedback from banks showed that the condition of taking over more than 50% of the outstanding loan was difficult to achieve, as a significant number of banks were also part of the consortium lending of such projects, RBI said.
Therefore, RBI said that it has decided that banks may refinance such loans by way of full or partial take-out financing.