BANKS Plea to Revise NPA Norms ‘REJECTED’

The banks requested RBI to consider de-linking of nonperforming asset (NPA) classification from the commercial operation date of a project. The current norms state that a term-loan for an infrastructure project will be classified as NPA if the project fails to commence commercial operations within two years from the original date of commencement. For non-infrastructure project loans, the time allowed is one year.

Appeals from banks to revise the norms for identification and classification of bad loans based on the commercial operation date of a project, have failed to find favour with the Reserve Bank of India (RBI). The banking regulator has no plan to change the guidelines and will consider requests from banks on a case-to-case basis, senior officials at RBI said. There is enough flexibility in the existing guidelines pertaining to the commercial operation date. Specific cases can be examined but it cannot be left openended, said deputy governor. If commercial production does not start on time, then the viability of the projects comes into question. Also, long-term projects are financed on floating rates and that is another source of risk. Banks should be able to identify these risks well in advance.