Banks to classify loans granted to Lavasa Corporation as infrastructure loans

MUMBAI: The Reserve Bank of India is expected to allow banks to classify loans granted to Lavasa Corporation as infrastructure loans, a move that could clear the road for the company to approach the corporate debt restructuring cell.

At present, loans given to the company are classified as commercial real estate loans and CDR norms do not permit restructuring of such loans. Lavasa and a bank consortium have been negotiating with RBI to consider their plea to classify these loans as infrastructure loans. “RBI is considering their plea favourably. Before going in for commercial construction the company has built roads, dams and also generated employment,” said a senior banker, who is part of the CDR cell. “Lavasa Corporation has so far not sent a formal application to the CDR cell,” he added. A spokesperson from parent company HCC, responding to an email query from ET said, “We cannot comment on speculation.”

A consortium of 10 lenders has an exposure of Rs 850 crore to Lavasa Corp, which is a subsidiary of HCC. In addition to loans, some banks have also invested in debentures of the company. Most of the banks have identified the loans as non-performing. According, to regulatory norms banks have to classify a loan account as bad debt if interest is not serviced for 90 days. In March, HCC was admitted to CDR for recasting loans worth Rs 3,000 crore. The company has been struggling with recurring losses and mounting debt amid slowdown in projects execution due to clearance issues and lack of new orders.

“The company is keen on pushing both the accounts simultaneously and complete restructuring,” said another banker. “We are waiting to hear from the central bank,” said a member bank of the CDR cell.