Banks may get to lend to NPA highway projects

March 8, 2016

In what may come as a major relief for the highway sector, the Reserve Bank of India (RBI) is expected to allow banks and financial institutions to lend o companies even if a project turns into a non-performing asset.

Sources said the indication came during a meeting between governor Raghuram Rajan and NHAI chairman in Mumbai. The RBI governor told Chandra that the central bank has come out with a circular, clarifying that a project becoming NPA will not result in choking of fund flow and it will not translate into lenders stopping loans, sources added. “We were told hat when any investment becomes NPA, the financial institutions have to provide additional funds for this. They need to deal with such project carefully rather than stopping release of loan. They will provide us this circular,” said an NHAI official.

 A loan is classified as an NPA if a borrower fails to pay installments for 90 days. “Usually highway projects become NPA for a certain period. As toll revenue starts flowing or vehicle flow increases, the project becomes viable,” said an official.
Although Chandra also took up the issue of priority sector status for highway projects with Rajan, RBI has said that too many sectors are now seeking this status.
Source: Times Of India

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