Concerned over the prevailing high interest rates scenario in the economy impacting the infrastructure development of the country, the government has written to the Reserve Bank of India (RBI) seeking changes in the rules of infrastructure financing including the treatment of non-performing loans to the sector.
Considering infrastructure development a most critical prerequisite to revive the economic growth, the ministry has urged the central bank that refinancing of delayed projects on case to case basis should be allowed without treating them as restructured loans that require higher provisioning. Refinancing particularly for infrastructure projects is a globally accepted practice due to their long gestation period, however, the refinancing in the country is still on hold owing to the stringent RBI norms.
As per the RBI’s new infrastructure lending norms, restructured accounts classified as non-performing advances when upgraded to standard category, will attract a higher provision in the first year from the date of upgradation. The provision on restructured standard advances has been increased to 5 percent from 2.75 percent in respect of new restructured standard accounts with effect from June 1, 2013. Infrastructure lending exerts a lot of pressure on the banks as large infrastructure and industrial projects usually have a moratorium period in their loans in which the borrower does not make interest or principal payment.
At present, there are around 378 stalled projects worth around Rs 17.23 lakh crore stuck due to delays in various clearances. Meanwhile in order to expedite the implementation of infra projects, the government has been taking various measures. Recently, it has set up Cabinet Committee on Investment (CCI) to accord fast track clearances to large projects. Till now, the CCI had cleared 209 projects worth Rs 3.84 lakh crore.
Considering infrastructure development a most critical prerequisite to revive the economic growth, the ministry has urged the central bank that refinancing of delayed projects on case to case basis should be allowed without treating them as restructured loans that require higher provisioning. Refinancing particularly for infrastructure projects is a globally accepted practice due to their long gestation period, however, the refinancing in the country is still on hold owing to the stringent RBI norms.
As per the RBI’s new infrastructure lending norms, restructured accounts classified as non-performing advances when upgraded to standard category, will attract a higher provision in the first year from the date of upgradation. The provision on restructured standard advances has been increased to 5 percent from 2.75 percent in respect of new restructured standard accounts with effect from June 1, 2013. Infrastructure lending exerts a lot of pressure on the banks as large infrastructure and industrial projects usually have a moratorium period in their loans in which the borrower does not make interest or principal payment.
At present, there are around 378 stalled projects worth around Rs 17.23 lakh crore stuck due to delays in various clearances. Meanwhile in order to expedite the implementation of infra projects, the government has been taking various measures. Recently, it has set up Cabinet Committee on Investment (CCI) to accord fast track clearances to large projects. Till now, the CCI had cleared 209 projects worth Rs 3.84 lakh crore.
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