Measures Taken By IIFCL To Keep Bad Loans Under Check: Parliamentary Panel

Appreciating the measures taken by IIFCL, a Parliamentary panel said initiative taken by the state-owned entity will keep bad loans under check and also help it in discharging its role as a pioneer lender in financing infrastructure projects. India Infrastructure Finance Company Limited (IIFCL) is a public sector financial institution established in January 2006 that is wholly-owned by the government of India.

According to the Committee on Public Undertakings (COPU) submitted recently in Parliament, measures taken will go a long way in improving and strengthening the functioning of IIFCL. The company has put in place a Board approved Management Policy which lays out the Directives and Guidelines for time-bound resolution of NPA by taking proactive actions.

The proactive actions are towards close monitoring, constant follow-up and evolving suitable modes for early resolution/ recovery of dues in line with the prescribed norm/guidelines of RBI and other applicable statutory/ regulatory authorities or directions from the central government, the report said. IIFCL has set up a specialised recovery and NPA management department and has strengthened this department with officers with specialised skills in recovery and NPA Management, the report titled 'Review of Loans to Road Projects relating to India Infrastructure Finance Company Limited (IIFCL)' said.

The capacities were further strengthened with external experts including an independent High Level Advisory Committee which is chaired by retired Judge of the Madras High Court and two former Executive (whole-time) Directors of Public Sector Banks and Financial Institutions, it said. "Similarly, to monitor the utilization of funds for further disbursement, IIFCL informed that it has taken several measures such as meaningful scrutiny of progress reports, balance sheets of borrowers, regular inspection of borrower's assets, books of accounts including 'no-lien' accounts maintained with other banks, and conducting regular on-site visit of the projects, etc," it said.

Highlighting the importance of site visits, the panel headed by senior BJP leader Santosh Gangwar said, it is the key elements instituted for effective monitoring of the project for securing project viability and ensuring quality of loan assets. Hence, it said, required resources should have been put in place in the larger interest of IIFCL as well as to ensure the viability of projects.

"IIFCL should not solely depend on the report of Lead Bank or any other consortium lender, but rather, should evolve a suitable mechanism for regular monitoring of the projects that they finance," it said. Considering the gravity of risk involved in calculating the viability of road projects on the basis of evaluation and projections made by traffic consultants, the Committee felt an urgent need for a system of rating of the traffic consultants on realistic and pragmatic parameters and that such ratings are disclosed in public domain, the report said.

The system will bring-in more reliability, credibility and prudence in work and traffic/revenue projections made by the traffic consultants, it said. At the same time, it said, the system will also immensely help the lenders, concessionaires and borrowers to calculate the risk before taking-up or financing any road project.

"The Committee, therefore, desires the government to devise ways and means for rating of Traffic Consultants and make available the information in public domain," it said. The panel suggested that a mechanism may be developed to restrict the Concessionaire from allowing any advance, other than mobilization advance, to the EPC contractor, that too backed by sufficient en-cashable security, in the possession of the lenders and such advances should be recovered in a time-bound manner.