Non-banking finance companies (NBFCs) can extend the date for commencement for commercial operations (DCCO) by a year, in the case of loans provided to commercial real estate projects which have been delayed for reason beyond the control of promoters.
Announcing a slew of liquidity and regulatory easing steps on Friday, RBI Governor Shaktikanta Das said that the extension can be made without treating the process as restructuring.
Das noted that the move will bring relief both to the NBFCs and developers,
"The date for commencement for commercial operations (DCCO) in respect of loans to commercial real estate projects delayed for reasons beyond the control of promoters can be extended by an additional one year, over and above the one-year extension permitted in normal course, without treating the same as restructuring. It has now been decided to extend a similar treatment to loans given by NBFCs to commercial real estate," he said.
This came as RBI announced a set of new measures including a reduction in reverse repo rate.
Accordingly, the rate now stands at 3.75% of LAF. The reverse repo is an important monetary policy tool used by the Reserve Bank to control liquidity and inflation in the economy.
Under the Reverse Repo Rate, banks deposit excess funds with the RBI and earn interest for it.
The move is expected to encourage banks to ease lending and investments into the economy.
Announcing the slew of measures via online channels, RBI Governor said that policy repo rate would for now be maintained at 4.4%.
RBI also announced a 90-day extension for the resolution period for large stressed assets which have not been resolved within the 210-day deadline as per the central banks June 7, 2019 order.
The RBI Governor also said that NPA classification will exclude the moratorium period.
Das noted that under RBI's prudential framework of resolution of stressed assets dated June 7, 2019, in the case of large accounts under default, Scheduled Commercial Banks, AIFIs, NBFC-ND-SIs and NBFC-D are currently required to hold an additional provision of 20% if a resolution plan has not been implemented within 210 days from the date of such default.
"Recognizing the challenges to resolution of stressed assets in the current volatile environment, it has been decided that the period for resolution plan shall be extended by 90 days," Das said.
On the relief offered to NBFCs and developers, sector experts have applauded the move and have described it as a "much needed" relief.
"This is indeed a big move and will bring much-needed relief to cash-starved developers. It will help in easing out time for maintaining and managing cash flows for these developers," Anuj Puri, Chairman of Anarock Property Consultants.
Piyush Gupta, Managing Director, Capital Markets at Colliers International India said that the decision will help developers in management of cash flow and curb stressed assets in the realty sector.
"There have been specific mention of lending to Real Estate Sector by NBFCs which reflects increased focus of the regulator on this sector. Developers now have additional one year to repay lenders which is over and above one year available so this will help management of cash flows and reduce asset classification stress of Real Estate focused NBFCs," Gupta said.