Tuesday, September 16, 2014

NPA Norms relaxed

Reserve Bank of India has decided to allow banks to fund cost overruns, which may arise on account of extension of DCCO up to 2 years (infra projects) and 1 year (others), without treating the loans as 'restructured asset' subject to the following conditions:

  • Banks may fund additional 'Interest During Construction', which may arise on account of delay in completion of a project;
  • Other cost overruns (excluding Interest During Construction) up to a maximum of 10% of the original project cost;
  • The Debt Equity Ratio as agreed at the time of initial financial closure should remain unchanged subsequent to funding cost overruns or improve in favour of the lenders and the revised Debt Service Coverage Ratio should be acceptable to the lenders;
  • Disbursement of funds for cost overruns should start only after the Sponsors/ Promoters bring in their share of funding of the cost overruns; and
  • All other terms and conditions of the loan should remain unchanged or enhanced in favour of the lenders.


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