The RBI has allowed banks leeway in respect of refinancing existing project loans to infrastructure and core industries by way of full or partial takeout financing, even without a pre-determined agreement with other banks/financial institutions.
In take-out financing, long-term financiers such as insurance companies and development financial institutions take over loans from banks, which have access to funds for relatively shorter period.
As per the latest notification on refinancing project loans, the central bank said banks can fix a longer repayment period, and the same would not be considered as restructuring in the books of the existing as well as taking over lenders, provided a few conditions are satisfied.
The conditions include aggregate exposure of all institutional lenders to such a project should be at least ₹1,000 crore.
Also, the repayment period should be fixed by taking into account the life cycle of and cash flows from the project; and the total repayment period should not exceed 85 per cent of the initial economic life of the project/concession period in the case of public-private partnership projects.