Bringing non-banking finance companies (NBFCs) on a par with banks, the Reserve Bank of India has allowed NBFCs to classify loans to projects that are stuck for two years as standard, even after the loan’s restructuring involves only a change in the repayment schedule.
In June 2014, the RBI had given these relaxations to banks.
Further for infrastructure projects stuck due to arbitration in courts, a further relaxation of two years has been given. This means that an NBFC can classify a restructured loan as standard if the project to which the loan is given has been delayed for four years. For infrastructure projects stuck due to reasons beyond the promoter’s control and for non-infrastructure projects, this leeway is only three years.
“In this connection, it is clarified that multiple revisions of the DCCO and consequential shift in repayment schedule for equal or shorter duration (including the start date and end date of revised repayment schedule) will be treated as a single event of restructuring provided that the revised DCCO is fixed within the respective time limits,” the RBI said in a notification on Friday.
Further, in cases where NBFCs have specifically sanctioned a ‘standby facility’ at the time of initial financial closure to fund cost overruns, they may fund cost overruns as per the agreed terms and conditions.