Central Govt. announces new infrastructure so called 5:25 scheme.

Akash Kanojia, Delhi

12th November 2014

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Hi Mr Akash,

The 5:25 scheme is aimed at correcting an asset-liability mismatch faced by banks wherein banks could not offer long-term loans to infrastructure projects.Banks rarely lend beyond five or seven years, but infrastructure projects can take up to 25 years to be viable.banks can’t raise money for that long a period to fund their requirements. The 5:25 scheme allows banks to think of the project in five-year windows. After that period, the borrower will pay back the loan through takeout financing provided by other banks.

Tushar Surendren, Delhi

12th November 2014

Comment

As per my knowledge, this 5:25 scheme had announced by finance minister was notified by RBI only for new infrastructure projects. The ministry was considering asking the Reserve Bank of India (RBI) to make this possible for older power projects. The move, if it happens, will ease project and financing bottlenecks for infrastructure projects.

Sufia, Delhi

12th November 2014

It is felt that benefits of long tenor loan based on the economic life of the project should also be extended to projects under implementation where date of commencement of commercial operations is yet to be achieved including cases where financing is being reworked taking into account cost overrun, if any, as a one time measure and for projects where restructuring package is being worked out under CDR or otherwise.

Tushar Surendren, Delhi

12th November 2014

In my point of view, infrastructure projects that are suffering from loan structuring issues due to short tenure of financing will be certainly benefited if the government extends the 5:25 scheme to existing infrastructure projects.
It will also address the issue of bad loans (and loans threatening to turn bad) on the books of state-run banks.

Akash Kanojia, Delhi

12th November 2014

Hi Guys,

According to me , this 5/25 scheme may also be allowed for the existing projects so as to relieve the stress of the existing projects. Such a step if initiated would enable loan repayments to be coterminous with cash flows from the project and improve debt servicing capacity and viability of the operational projects.

Yogita Bali, Noida

12th November 2014