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Giving more flexibility to finance companies in recast of loans, the Reserve Bank of India has said multiple revisions in date of commencement of commercial operations (DCCO) and repayments within prescribed time limits will be treated as a single event of restructuring.
Non-banking finance companies (NBFCs) are free to extend DCCO beyond the prescribed time limits. However, such cases will not enjoy ‘standard’ asset status for loan, RBI said.
Globally, the initial financial closures also envisage financing of cost overruns. NBFCs can fund these in cases where the initial financial closure did not factor this in. Such overruns could arise due to DCCO extension within time limits. The financing can be done without the loans being treated as a restructured asset.
The leeway comes with riders. Disbursement of funds for cost overruns should start only after sponsors/promoters bring in their share of funding of the cost overruns, RBI said. The debt to equity ratio agreed at the time of initial financial closure should be unchanged subsequent to funding the overruns. Else, it could be improved in favour of the lenders.
The revised debt service coverage ratio should also be acceptable to the lenders, RBI added.
