RBI reviews guidelines on restructuring of advances by NBFCs

The Reserve Bank of India has permitted non-bank lenders to retain the 'standard asset' tag on a restructured loan for an extended period if an infrastructure project is mired in court cases, or has been stuck for reasons beyond the control of the promoters.

This decision has been taken to help revive stalled projects in the economy.

The RBI has said in a statement that the easing of NBFC loan norms will be applied as follows:

Infrastructure Projects involving court cases

Up to another two years (beyond the two year period quoted at paragraph 2(a)above, i.e., total extension of four years), in case the reason for extension of DCCO is arbitration proceedings or a court case.

Infrastructure Projects delayed for other reasons beyond the control of promoters

Up to another one year (beyond the two year period quoted at paragraph 2(a) above, i.e., total extension of three years), in case the reason for extension of DCCO is beyond the control of promoters (other than court cases).

Project Loans for Non-Infrastructure Sector (Other than Commercial Real Estate Exposures)

Up to another one year (beyond the one year period quoted at paragraph 2(a) above, i.e., total extension of two years).

The RBI has also advised that if a change in ownership takes place any time during specified periods, NBFCs may permit extension of the DCCO of the project up to two years.

It said NBFCs may also consequentially shift or extend the repayment schedule, if required, by an equal or shorter duration.

It also said that NBFCs should establish that implementation of the project is stalled or affected primarily due to inadequacies of the current promoters/management and with a change in ownership there is a very high probability of commencement of commercial operations by the project within the extended period.

It said the project in consideration should be taken over or acquired by a new promoter or promoter group with sufficient expertise in the field of operation, adding that if the acquisition is being carried out by a special purpose vehicle (domestic or overseas), the NBFC should be able to clearly demonstrate that the acquiring entity is part of a new promoter group with sufficient expertise in the field of operation.

It said the new promoters should own at least 51 per cent of the paid up equity capital of stake in the acquired project.

If the new promoter is a non-resident, and in sectors where the ceiling on foreign investment is less than 51 per cent, the new promoter should own at least 26 per cent of the paid up equity capital or up to applicable foreign investment limit, whichever is higher, provided NBFCs are satisfied that with this equity stake the new non-resident promoter controls the management of the project;

It said that viability of the project should be established to the satisfaction of the NBFCs.