NBFCs and HFCs are presumed to get additional one-year loan restructuring extension.

The next possible extension of the Date of Commencement of Commercial Operations (DCCO) of commercial real estate project loans by one year without downgrading asset classification may be allowed in a financially sound Non-Banking Finance Companies NBFCs and Housing Finance Companies (HFCs).

Official sources stated that, following the recently concluded meeting of the Monetary Policy Committee on February 6, the Reserve Bank of India (RBI) extends this facility to the banks, and NBFCs and HFCs can now be included within the scheme to allow more viable real estate projects to complete which are delayed for reasons beyond promoters’ control.

The step not only brings NBFCs, HFCs and banks in line with loans provided to restructure projects without lowering the asset classification, but also provides significant relief for commercial and residential estate projects which have been postponed because of regulatory issues.

Companies like LIC Housing Finance, PNB Housing and Shriram Finance, which remain largely unimpacted following problems in the sector by the ongoing liquidity crisis, can be offered.

As per RBI, Commercial Real Estate (CRE) means all classes of real estate assets such as the development of commercial buildings, IT buildings and residential buildings for which banks have lent loans to the builders.

According to Emkay’s brokerage firm, very minimal effect on the sector will occur on the proposed extension of DCCOs to NBFCs and HFCs as very few current NBFCs/HFK projects have chosen to extend the existing one-year extension by the RBI.

This can, however, have a positive effect on stock prices in NBFC/HFC that were exposed to some pressure off late.

The expected extension of the facility to NBFCs and HFCs may not be an improbable move from RBI since even the prior circular on the same reforms was first made accessible to the banks and later extended to NBFCs/HFCs.

Banks and NBFC/HFCs already have a one-year extension window for all CREs available (on the basis of the circular in 2015). The recent announcement after the MPC meeting, however, provides banks with an additional one-year window which NBFC/HFCs do not have.