RBI wont allow realty loan recast

The Reserve Bank of India (RBI) has ruled out any further relief to developers who are finding it difficult to repay their loans. This was made clear to banks that had made a representation that they be allowed to restructure real estate loans in a repeat of the onetime dispensation extended to them a year ago. The asset classification norms, which decide when a loan is to be treated as a non-performing asset (NPA), are much stricter for nonmanufacturing companies, including developers. For manufacturing companies, it is only after a loan is restructured for the second time that lenders are required to classify it as an NPA. But if it is for non-manufacturing purposes, which includes real estate, personal loans or loans to brokers, the loan has to be classified as NPA the moment it is restructured. Typically, restructuring of a loan involves reducing the rate of interest and giving the borrower more time to repay. Following the collapse of Lehman Brothers, a part of the relief package extended by RBI included a dispensation that allowed banks to restructure loans to both manufacturers and developers and continue showing the loan as a standard asset.