IIFCL in spotlight for lending deficiencies in road projects
Government-owned long term financing company India Infrastructure Finance Company Ltd (IIFCL) has come under criticism of the Comptroller and Auditor General of India (CAG) for its deficiencies in lending to road projects.
Several deficiencies, including not giving due attention to the major risk of Right of Way availability to projects, led to a loan of Rs 1,895.50 crore to nine out of 32 projects examined in audit, becoming a non-performing asset (NPA), said the CAG report.
Seven out of nine NPA cases showed unavailability of the required Right-of-Way as the primary reason for non-completion of projects and turning the loans into NPAs.
The CAG report said in one NPA case, unrealistic traffic projection affected the project’s commercial viability.
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In many cases, the loans were disbursed without ensuring compliance with Common Loan Agreement (CLA) conditions relating to environment, forest and tree cutting clearances, infusion of required equity through an escrow account and funding of cost overrun or IDC by promoters. This led to a risk of misuse of funds by promoters, delay in work progress, and an additional avoidable loan to badly managed projects.
The CAG has also said that IIFCL sanctioned and disbursed two loans under Takeout Finance Scheme without ensuring compliance with the critical requirement of obtaining ‘No Objection Certificate’ (NOC) from concessioning authorities, and without ensuring required debt servicing capacity of the borrowers. Resultantly, IIFCL ended up lending Rs 26.20 crore to already terminated projects.
Image: The CAG said IIFCL disbursed loans without complying with CLA.
Also read: Government seeks to restructure IIFCL