Flexible Lending Norms
Injecting a major moral booster to the hard pressed infrastructure building players in the core sector projects, the Reserve Bank of India in a recent move has allowed banks to be flexible in lending loans to existing infra projects, in line with cash flows available for debt refinancing and that the facility will also be available for non-performing loans, the bank said in a recent statement, claiming that to date, flexible structuring of project loans with the option of periodic refinancing was available only to new loans, for projects sanctioned after July 15, 2014 and that for new loans, the RBI had not prescribed any ceiling or floor on the repayment period. The latest move of the apex bank will surely benefit infrastructure and core sector companies that have projects involving huge investment as banks will now be in a position to offer loans for an extended period. The bank, however, said that only term loans to projects in which the aggregate exposure of all institutional lenders exceeds Rs.500cr will qualify for such flexible structuring and refinancing.

It is worth mentioning here that the infrastructure sector included sub-sectors such as transport, energy, water and sanitation, communication, and social and commercial infrastructure. The core sector includes coal, crude oil, natural gas, petroleum refinery products, fertilizers, steel, cement and electricity. In fact, infrastructure and core sector projects, which were taken up in the boom period after 2004, had repayment tenure of 10-15 years as banks had asset-liability mismatch issues, Managing Director, Brescon Corporate Advisors, Nirmal Gangwal, said explaining that in the last few years with the economic downturn, these projects were not able to generate enough profits to service loans and needed an extended repayment tenure and now with flexibility to structure existing loans with the option to periodically refinance will help both banks and infrastructure and core project developers, he added.