FinMin asks RBI to consider one-time recast of developer’s Loan

In an effort to relieve the inactive realty sector, Modi govt is looking at yet another way to revive it. And it is true. The real estate sector plays a key role in the country’s economy, without which the economy can’t bounce back. That is the reason the Prime Minister’s Office and the Finance Ministry have asked the RBI to direct banks to implement a one-time roll-over of developer’s loans across the country, which can also be seen as a preventive measure to prevent the housing crisis and would hurt the bank badly. They have sought the view of the Reserve Bank of India (RBI) on the matter.

Currently, this one-time loan roll-over is to prevent other NPAs from happening as it happened in 2008 at the time of Lehman Brothers’ fall.

The banks will be requested to not label these loans like those for Special Mention Accounts and to use the power provided to them by the Finance Ministry to implement a one-time roll-over of developer’s loans.

Currently, banks are hesitant to allow a one-time roll-over of all loans but to empower banks to decide which developers and projects deserve to avail of this facility.

As per Fitch Ratings, nearly $25 billion of developers’ loans are coming up for repayment in the first half of fiscal 2019-20. The Confederation of Real Estate Developers Association of India (CREDAI) and the National Real Estate Development Council (NAREDCO) have been asking the Centre to allow this one-time roll-over of loans so that these developers’ projects do not end up as non-performing assets (NPA).