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Banks can now heave a sigh of relief. The Reserve Bank of India (RBI) has issued a diktat to banks saying that the seven severely delayed mega infrastructure projects need not be treated as non-performing assets.
The RBI rules state that if the date of commencement of commercial production or operation extends beyond two years from the date of completion of the infrastructure project, as originally envisaged at the time of financial closure, the account should be treated as a sub-standard asset.
This is a form of non-performing loan. After a loan has been classified as an NPA, banks cannot extend further financing and have to take measures to recover their loans.
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And most of the times projects are delayed either due to a legal action or other circumstances. Banks had sought a dispensation where such loans would not be treated as an NPA.
The projects include the Rs2,250 crore Bangalore-Mysore Infrastructure Corridor (BMIC) project also known as the Nandi Economic Corridor, three projects of GVK Industries, Vemagiri Power Generation, Gautami Power and Konaseema Gas Power. Some of these projects are affected because of issues related to gas supply.
RBI has asked the banks to undertake afresh a financial viability study in order to assess their eligibility for restructuring.
In case the projects are found eligible for restructuring, and the banks concerned choose to undertake their restructuring, it has been decided that as a one-time measure the seven projects under implementation would not be treated as a bad loan upon restructuring even if the account was NPA at the time of such restructuring.
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