The Reserve Bank of India (RBI) on Monday issued new infrastructure and core sector project norms. RBI decided to allow the banks to flexibly structure the existing project loans to infrastructure projects and core industries projects with the option to periodically refinance.

RBI said, only term loans to projects, in which the aggregate exposure of all institutional lenders exceeds Rs 5 billion, in the infrastructure sector and in the core industries sector will qualify for such flexible structuring and refinancing.

It further said, banks may fix a Fresh Loan Amortisation Schedule for the existing project loans once during the life time of the project, after the date of commencement of commercial operations (DCCO), based on the reassessment of the project cash flows, without this being treated as restructuring provided.

If a project loan is classified as restructured standard asset as on the date of fixing the Fresh Loan Amortisation Schedule, while the current exercise of fixing the Fresh Loan Amortisation Schedule may not be treated as an event of repeated restructuring, the loan should continue to be classified as restructured standard asset. Upgradation of such assets would be governed by the extant prudential guidelines on restructuring of accounts taking into account the Fresh Loan Amortisation Schedule.

Also banks may refinance the project term loan periodically (say 5 to 7 years) after the project has commenced commercial operations. The repayment at the end of each refinancing period could be structured as a bullet repayment, with the intent specified up front that it will be refinanced. The refinance may be taken up by the same lender or a set of new lenders, or combination of both, or by issue of corporate bond, as refinancing debt facility, and such refinancing may repeat till the end of the Fresh Loan Amortisation Schedule.

RBI further said, banks may determine the pricing of the loans at each stage of the project term loan or refinancing debt facility, commensurate with the risk at each phase of the loan, and such pricing should not be below the Base Rate of the bank and banks should secure their interest by way of proper documentation and security creation, etc.

Also, if the project term loan or refinancing debt facility becomes a non-performing asset (NPA) at any stage, further refinancing should stop and the bank which holds the loan when it becomes NPA would be required to recognize the loan as such and make necessary provisions as required under the extant regulations.