Money & Banking

5/25 refinance deals to be reviewed at random

Our Bureau Mumbai | Updated on January 23, 2018 Published on August 27, 2015

To avoid use of such deals for postponing payments

The Reserve Bank of India said it is undertaking periodic examination of randomly selected “5/25” deals to ensure they are facilitating genuine adjustment rather than becoming a backdoor means of postponing principal payments indefinitely.

To deal with genuine problems of poor structuring (of long-term project financing), the RBI has allowed bankers to stretch repayment profiles for performing loans to infrastructure and the core sector (the “5/25” rule), provided the project has reached commercial take-off, has a genuinely long commercial life, and the net present value of loans is maintained.

Going forward, the RBI, in its annual report, said it has to monitor the efficacy of the various measures put in place to speed up resolution, and take remedial action where necessary.

Recap fund

The central bank said the move by the Government to add to the recapitalisation fund for banks is welcome, as is the proposal to allocate it taking into account the progress in cleaning up balance sheets and generating healthy growth.

“The RBI will welcome progress in the coming year on the creation of the institutions necessary for resolution such as the new Bankruptcy Code and the Company Law Tribunals that will administer it and the Financial Resolution Authority (for resolving financial institution distress).

Published on August 27, 2015
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