In a communication to banks, the Reserve Bank of India (RBI) asked lenders to take steps to mitigate risks on loans given for infrastructure projects under the public-private partnership (PPP) model.
The RBI asked banks make provisions such as pre-determined increase in user charges for infrastructure projects in order to ensure sufficient risk mitigation. There has to be provision for increasing the concession period when the earnings (from the project) are lower than anticipated.
The regulator asked banks who have lent to PPP road projects to ensure that the toll, rates and payments are kept in an escrow account. The lenders will have priority over concessionaires to withdraw money from such accounts, said RBI.
The central bank even gave banks the right to substitute the concessionaire or right to trigger termination in case of default in debt service.
In the context of the above risk mitigating features, the RBI allowed banks to consider loans to such projects under the PPP mode as secured exposure.
Leave a Reply
You must be logged in to post a comment.