What changed
Previously, refinancing a project loan with a longer repayment period was treated as restructuring. Now, if the loan is standard, not restructured before, and over 50% is taken over by other banks/FIs, it won't be considered restructuring. For NPA sales, the circular encourages early sale to SCs/RCs when assets have revival potential, not just as a last resort.
What it means for you
Banks can now refinance stressed but standard infrastructure loans without triggering restructuring classification, preserving asset quality. This encourages proactive resolution of distressed assets by selling to SCs/RCs earlier, potentially reducing provisioning needs and improving recovery outcomes.
What you must do
- Review existing infrastructure project loans to identify standard accounts suitable for take-out financing under the new conditions.
- Ensure any refinancing arrangement meets the more than 50% takeover threshold by value and repayment schedule based on project cash flows.
- Update internal policies to distinguish between restructuring and permissible refinancing for project loans.
- Evaluate early sale of NPAs to SCs/RCs, especially under consortium arrangements where at least 75% by value of lenders agree.
Who it affects
Scheduled commercial banks (excluding RRBs), All-India term-lending and refinancing institutions (Exim Bank, NABARD, NHB, SIDBI), Securitisation companies and reconstruction companies
Does refinancing a project loan always count as restructuring?
No, if the loan is standard, not previously restructured, and more than 50% of the outstanding by value is taken over by other banks/FIs, with repayment based on project cash flows, it won't be treated as restructuring.
Can we sell a standard asset to an SC/RC?
Yes, but only if the asset is under consortium/multiple banking, at least 75% by value of the asset is NPA in other banks' books, and at least 75% by value of lenders agree to the sale.