To revive stalled road projects and also alleviate banks’ bad loans burden, the National Highways Authority of India (NHAI) has mooted the idea of floating a company that will buy these loans and turnaround the projects.

In this regard, the Authority has sounded out banks about forming a joint venture company.

Stalled projects This move comes in the backdrop of assessment of the Road Transport, Highways and Shipping Ministry in June that over 260 road projects involving about ₹60,000 crore were stalled because of various reasons. Of this amount, a large percentage has also become NPAs (non-performing assets) for banks. The company being envisaged by NHAI will be on the lines of an asset reconstruction company (ARC). It will be dedicated to resolution of bad loans of banks in the roads sector.

The proposed company will buy out stalled road project loans from banks at a discount, complete them and sell the completed projects to investors.

An ARC buys out stressed loans from banks by mostly issuing securitised receipts and paying some cash.According to CVR Rajendran, Chairman and Managing Director, Andhra Bank, while the proposal to create an ARC-like company to takeover distressed road sector loans from banks is welcome, investing in the capital of the company could be a constraint given that resources are hard to come by.

However, if NHAI and all banks join forces, then the company could become a reality as the burden of injecting capital will be shared. Banks could also lend to this company, he added.

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