In a year when ctringent policy action on bans has been replaced by a considered caution in tightening and monetary loosening in policy, th ebanks have been asked to bear the burden of LGFV (LSFs) that were coming dues this year on project basis. The 2009 loan largesse was coming due this year with more than 10% estimated to default and it was earlier expected that the central bank may write off parts of such loans leaving a amangeable chunk for banks to carry on their balance sheets. However, after the recapitalisation of the banks thru the huijin arm, the banks have now been directed to roll oevr all the loans for a similar term. FT declares the Central bank push indicating loan extensions (maturity) could last as much as 4 years
The criteria for the rollover and the governents shying away from assuming someof the loans a s guarantor are both likely to become a cause of criticism aand further follow on action is likely in one quarter of observation. The loans will be rolled over on basis of criticality of end use, as FT mentions between highways and town squares the highways will squeak through
The rollover evaluation would also become a pitstop to rerate the projects on environmental reviews neglected originally and score them in terms of policy objectives of industrial upgradtion in the twelfth 5 year plan
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