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Finance Ministry for relaxation of norms for loans to infra sector

Nov 24 2013, 13:15 IST
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SummaryFinance Ministry has favoured relaxation of lending rules for infrastructure projects so as to expedite them.

The Finance Ministry has favoured relaxation of lending rules for infrastructure projects so as to expedite them.

It has written to the Reserve Bank suggesting changes in the rules for infrastructure financing, including the treatment of non-performing loans to the sector, sources said.

Some relaxation for limited period would help revive projects which have been stalled due to existing norms of RBI, sources added.

The ministry said refinancing of delayed projects on case to case basis could be allowed without treating them as restructured loans, in which case banks have to do higher provisioning.

As per the revised norms of RBI, 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 2.75 per cent to 5 per cent in respect of new restructured standard accounts with effect from June 1, 2013.

Besides, banks have been asked to increase provisioning in case of restructured standard accounts before June 1, 2013 would go up to 5 per cent in phased manner.

Earlier this week, Finance Minister P Chidambaram had underlined the need for redrawing procedures to expedite the implementation of the projects saying conceptualisation is good while project implementation is extremely poor.

"We are very good at conceptualising an idea. We are very good at designing a project. We are also good in raising funds. But we are extremely poor in implementing projects," he had said.

In January, the government set up the Cabinet Committee on Investment (CCI) to accord fast track clearances to large projects. Till September, the CCI had cleared 209 projects worth Rs 3.84 lakh crore.

Further the Prime Minister's Project Monitoring Group (PMG), set up to track stalled large investment projects, has cleared 128 projects worth over Rs 4.30 lakh crore so far.

The PMG was set up in June to facilitate and work for resolving specific issues of the projects and fast tracking them.

Issues related with 99 projects involving Rs 3.68 lakh crore investment have been resolved by the CCI and the PMG.

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