With stalled projects locking up bank funds and raising their non-performing assets (NPA), the RBI has got in touch with the Prime Minister’s project monitoring group to assess the need for regulatory concessions to companies facing genuine problems. The information with the PMG is also expected to help the RBI identify wilful defaulters.
“The RBI has sought details of projects cleared by the PMG and Cabinet Committee on Investment,” a senior government official told FE.
The finance ministry has put in place a system to track projected and actual investment by companies whose projects are cleared.
The details that the RBI is seeking from the PMG include the overall duration that a project remained as ‘stalled’, whether the promoters, who have got clearance, are making/getting investments, whether the project was stalled for genuine reasons and whether the project is being put up with the PMG to buy time or to divert funds.
“There is a suspicion that some projects, especially in the road sector, were being masqueraded as ‘stalled’ so that promoters can exit them and seek compensation from the government agengies,” an official said.
The department of financial services under the finance ministry has put in a mechanism to track investments and is asking developers whose stalled projects have been cleared by the CCI and the PMG to voluntarily submit quarterly targets that they have set for investment and the actual investment that has taken place every quarter.
“Though no one is bound to disclose investment figures, since it is not some secret data, it will be better if they submit it. The assumption is that if a businessman has run around so much to get all the clearances and if the PMG has fast-tracked it, he should not have any problems in starting investing. Besides, lenders have also expressed their intention to disburse loans to those projects with all the required clearances,” a senior official in the know of the developements said.
The finance ministry has asked the RBI to ease norms, particularly those concerning what constitutes NPAs or bad loans, for the infrastructure sector to revive them. The ministry wants the RBI to permit refinancing of stalled projects on an item-by-item basis without classifying them as restructured loans.
According to the recent RBI norms, lenders are required to make increased provisioning when restructured loans, treated as non-performing assets, are upgraded to the ‘standard’ category. The ministry has also asked the RBI to relax norms on date of commencement of commercial operation (DCCO) for infrastructure projects on account of the problems they have faced in getting approvals as well as the contribution they could make to boost growth and employment.
Currently, infrastructure project loans are classified as NPA “if it fails to commence commercial operations within two years from the original DCCO, even if it is regular as per record of recovery, unless it is restructured and becomes eligible for classification as ‘standard asset’”. In cases of infrastructure projects delayed for reasons beyond the control of promoters, a relaxation of up to 1 year (beyond the existing extended period of 2 years, that is a total extension of 3 years), in other than court cases.
The RBI has off late turned tough on wilful defaulters, with governor Raghuram Rajan advocating sale of assets by banks. Rajan also wanted assets of such promoters to be taken over and sold.
Speaking at the Delhi Economic Conclave on Wednesday, Rajan said the RBI is considering a new category called ‘uncooperative defaulter’ for wilful defaulters, a move that will lead to future borrowings by wilful defaulters becoming more expensive. ‘Uncooperative defaulters’ will include those who do not work with their lenders to achieve equitable and efficient resolution of stressed assets, he added.
He added that the RBI will bring out a discussion paper next week to deal with distressed borrower. The paper will focus on recognition, resolution and recovery of assets, he said.