RBI eases infra loan norms to provide banks flexibility

Refinancing easier for loans over Rs 500 cr

RBI eases infra loan norms to provide banks flexibility

To revive stalled plans and help banks tide over mounting bad loans, the RBI on Monday eased norms for structuring of existing long-term project loans to infrastructure and core industries.

The new guideline widens the scope of 5:25 scheme by including existing standard long-term project loans worth over Rs 500 crore to be flexibly structured and refinanced.

“The banks can flexibly structure the existing project loans to infrastructure and core industries projects with the option to periodically refinance them,” the Reserve Bank said in a circular.

The 5:25 scheme envisages banks to refinance or sell out their long-term project loans after every five years so that both borrower and lender do not face much of an issue. For banks to avail such a facility, the loan tenor cannot be more than 25 years.

In July, the RBI had allowed flexibility in structuring project loans only to new loans to infrastructure and core industries plans. The latest RBI move comes after banks demanded flexibility in structuring their existing long-term project loans. The structuring will ensure long-term viability of existing infrastructure and core industries projects by aligning the debt repayment obligations with cash flows generated during their economic life, the circular said.

During the December 2 monetary policy review, Governor Raghuram Rajan had said he would soon come out with two key steps to help banks tide over the infra financing by amending the 5:25 scheme. The circular said banks can refinance these term loans periodically, say every five to seven years, after the project has commenced commercial operations.

RBI said banks may fix a fresh amortisation schedule for the existing project loans once during the life time of the project, after the date of commencement of commercial operations (DCCO), based on reassessment of cash flows and without this being treated as 'restructuring'.

Sebi seeks parity between foreign currency, rupee convertibles

Market regulator Sebi  said it is in favour of allowing rupee convertibles for domestic investors, on the lines of overseas investors subscribing to foreign currency convertible bonds.

"If a foreign investor can subscribe to a foreign currency convertible, why it is not possible for domestic investors to do the same in the rupee? We are working on it but there is a problem with regard to a provision in the Companies Act. We will be approaching the right authorities before finalising our view," Sebi Chairman U K Sinha said today.

Speaking at the Association of Investment Bankers of India (AIBI) summit here, Sinha also called for aligning the time-gap between a foreign currency convertible bond and rupee-denominated domestic bonds. He said he fully supports the industry view that like there is convertibles in foreign currencies, there should be convertible in the rupee too.

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