RBI releases prudential norms for lending to infra cos

The Reserve Bank of India today made it a tad easier for developers of infrastructure projects to raise bank loans. So far developers have been allowed to hypothecate their receivables in the form of toll charges to banks. Now, the RBI says where developers for a PPP project have entered into a concession agreement with ministries or state governments, the debt due to the developers may be considered as secured collateral.

However, for such collateral to be considered secured, the toll charges have to be kept in an escrow account, over which the lenders will have priority over the developer. Also the agreements should have elements like permission for the developer to increase toll charges in case project revenues are lower than anticipated.

The lenders will also have a right to trigger termination in case of default in debt service; and upon termination, the project authority has an obligation of (i) compulsory buy-out and (ii) repayment of debt due in a pre-determined manner.

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