Change in Ownership
i. In order to facilitate revival of the projects stalled primarily due to inadequacies of the current promoters, if a change in ownership takes place any time during the periods quoted in paragraphs 4.2.15.3 of the circular or before the original DCCO, banks may permit extension of the DCCO of the project up to two years in addition to the periods quoted at paragraph 4.2.15.3 of the circular as the case may be, without any change in asset classification of the account subject to the conditions stipulated in the
following paragraphs. Banks may also consequentially shift/extend repayment schedule, if required, by an equal or shorter duration.
ii. In cases where change in ownership and extension of DCCO (as indicated in paragraph 4.2.15.5 (i) of the circular) takes place before the original DCCO, and if the project fails to commence commercial operations by the extended DCCO, the project will be eligible for further extension of DCCO in terms of guidelines quoted at paragraph 4.2.15.3 of the circular. Similarly, where change in ownership and extension of DCCO takes place during the period quoted in paragraph 4.2.15.3 (i) of the circular, the account may still be restructured by extension of DCCO in terms of guidelines quoted at paragraph 4.2.15.3 (ii) of the circular, without classifying the account as non-performing asset.
iii. The provisions of paragraphs 4.2.15.4 (i) and 4.2.15.4 (ii) of the circular are subject to the following conditions:
a. Banks should establish that implementation of the project is stalled/affected primarily due to inadequacies of the current promoters/management and with a change in ownership there is a very high probability of commencement of commercial operations by the project within the extended period; b. The project in consideration should be taken-over/acquired by a new promoter/promoter group with sufficient expertise in the field of operation. If the acquisition is being carried out by a special purpose vehicle (domestic or overseas), the bank should be able to clearly demonstrate that the acquiring entity is part of a new promoter group with sufficient expertise in the field of operation;
c. The new promoters should own at least 51 per cent of the paid up equity capital of stake in the acquired project. If the new promoter is a non-resident, and in sectors where the ceiling on foreign investment is less than 51 per cent, the new promoter should own atleast 26 per cent of the paid up equity capital or up to applicable foreign investment limit, whichever is higher, provided banks are satisfied that with this equity stake the new non-resident promoter controls the management of the project;
d. Viability of the project should be established to the satisfaction of the banks;
e. Intra-group business restructuring/mergers/acquisitions and/or takeover/acquisition of the project by other entities/subsidiaries/ associates etc. (domestic as well as overseas), belonging to the existing promoter/promoter group will not qualify for this facility. The banks should clearly establish that the acquirer does not belong to the existing promoter group;
f. Asset classification of the account as on the ‘reference date’ would continue during the extended period. For this purpose, the ‘reference date’ would be the date of execution of preliminary binding agreement between the parties to the transaction, provided that the acquisition/takeover of ownership as per the provisions of law/regulations governing such acquisition/takeover is completed within a period of 90 days from the date of execution of preliminary binding agreement. During the intervening period, the usual asset classification norms would continue to apply. If the change in ownership is not completed within 90 days from the preliminary binding agreement, the ‘reference date’ would be the effective date of acquisition/takeover as per the provisions of law/regulations governing such acquisition/takeover;
g. The new owners/promoters are expected to demonstrate their commitment by bringing in substantial portion of additional monies required to complete the project within the extended time period. As such, treatment of financing of cost overruns for the project shall be subject to the guidelines prescribed in paragraph 13 of the circular. Financing of cost overrun beyond the ceiling prescribed in paragraph 13 of the circular would be treated as an event of restructuring even if the extension of DCCO is within the limits prescribed above;
h. While considering the extension of DCCO (up to an additional period of 2 years) for the benefits envisaged hereinabove, banks shall make sure that the repayment schedule does not extend beyond 85 per cent of the economic life/concession period of the project; and
i. This facility would be available to a project only once and will not be available during subsequent change in ownership, if any.
iv. Loans covered under this guideline would attract provisioning as per the extant provisioning norms depending upon their asset classification status.