economy

Finmin  may  tweak  rules to boost infra financing

Finmin  may  tweak  rules to boost infra financing

The finance ministry is studying a proposal to liberalize loan classification norms to ease infrastructure financing for lenders and developers, a person familiar with the plan said. The idea is to remove the stigma of loan restructuring in the case of viable infrastructure projects. The finance ministry’s plan currently needs to be endorsed by the Reserve Bank of India for implementation, the person cited above said on condition of anonymity. “Infrastructure projects face delays on account of various factors, including weather conditions, environmental activism, land acquisition-related matters and, of course, the impact of the pandemic. More flexibility in asset classification norms of infrastructure loans would be immensely desirable where a new set of lenders wants to come in, the person said. RBI’s asset classification norms specify that restructuring is an act, where a lender grants concessions to a borrower for economic or legal reasons, resulting in modification of the terms of the loan. The central bank mandates that in case of restructuring, accounts classified as ‘standard’ will immediately have to be downgraded as non-performing, in the ‘sub-standard’ category, to begin with. The other non-performing asset (NPA) classes are ‘doubtful assets’ where repayment is highly questionable and improbable and ‘loss assets’ where dues are ‘uncollectible’. The move comes at a time the government is pressing ahead with about 7,000 projects costing ₹111 trillion. Earlier this month, the government rolled out a scheme called Gati Shakti for integrated planning and execution of infra projects. An email sent to the finance ministry seeking comments remained unanswered at the time of going to press. Experts said that flexibility to address uncertainties and risks inherent in infrastructure projects through restructuring infrastructure loans without downgrade has merit, but it needs to be resorted to after due consideration and with adequate safeguards. “This could be done on a case-to-case basis based on a reasonable assessment of the current status of the project, associated risks and uncertainties, viability and the future cashflow. We should be wary of past practices for taking recourse to restructuring by lenders to avoid downgrade and by promoters for avoiding punitive measures by lenders, said Ashok Haldia, former managing director of PTC India Financial Services Ltd. It is also necessary to ensure that the restructuring package is holistic with the promoter’s commitment to project completion and its successful operations, said Haldia. Infrastructure development is central to the Union government’s strategy to give momentum to economic growth and was a key pillar of the FY22 Union budget. Facilitating higher capital spending by states and monetizing assets to find resources for fresh investments are also key elements of the strategy. Social infrastructure facilities such as hospitals too figure high in the priority of policymakers. The centre government’s plan is to make a capital spending of more than ₹5.5 trillion this fiscal year. Download.

economy 2021-10-30 Livemint