Allow bankers to replace road project developers facing financial stress rather than declaring the projects as non-performing, National Highways Authority of India Chairman R.P. Singh has suggested.

Projects under stress are those where the developers are finding it difficult to bring in equity or stick to the original repayment norms.

“Banks can step in and replace developers under stress so that highway projects can be saved. At present, they step in only after a project is declared NPA,” Singh told Business Line .

To allow lenders to step in early, the concession agreement needs to be changed, said Singh. Recently, Finance Minister P. Chidambaram asked public sector banks to start taking steps to push stalled projects in the infrastructure sector, including roads.

Bank lending to the road sector stood at Rs 114,383 crore in 2012, accounting for over 18 per cent of their total exposure to infrastructure. Typically, banks fund up to 80 per cent of a highway project.

Many highway developers are reporting much lower toll collections than their original projections with a thinning of traffic because of the slowdown over the last two years. As S. B. Nayar, Deputy Managing Director and Group Executive, SBI, Corporate Banking Group, said: “There are stressed assets, but no NPAs in road sector yet. The cash flow of many projects has come under stress due to dip in revenues from toll earnings.”

However, early intervention by bankers will require a level of “lender activism” that is yet to be seen in the infrastructure space. “The proposal, though ideal, is based on the presumption that some other developer is ready to step in with the same obligations as the original developer,” said another official from a lending agency, declining to be named.

> mamuni.das@thehindu.co.in

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