Asset classification for infrastructure companies revised

The Reserve Bank of India (RBI) has provided a breather to infrastructure firms, allowing banks to treat loans to these entities as standard even if the date of commencement of a project is delayed by up to two years.

“It is clarified multiple revisions of the DCCO (date of commencement of commercial operations) and the consequential shift in repayment schedule for an equal or shorter duration (including the start-date and the end-date of the revised repayment schedule) will be treated as a single event of restructuring, provided the revised DCCO is fixed within the respective time limits,” RBI said in a notification.

This will only be applicable if the revised DCCO is within two years and one year for infrastructure projects and non-infrastructure projects, respectively, of the original DCCO, at the time of financial closure (provided all other conditions and terms of the loan remain unchanged).

This will give infrastructure firms more leeway on the financing front.

The RBI notification said banks could postpone the DCCO in case the infrastructure project concerned was involved in litigation or delayed due to reasons beyond the control of promoters. With extensions in both cases, the loan would be treated as a standard asset.