RBI's New Project Loan Guidelines to Transform Infrastructure Financing, ET Infra
Advt
By ,
ET Online and Agencies
Join the community of 2M+ industry professionals. Subscribe to Newsletter to get latest insights & analysis in your inbox.
Get updates on your preferred social platform Follow us for the latest news, insider access to events and more.
The Reserve Bank of India ( RBI ) has relaxed key norms for project financing, a move that is set to reduce capital provisioning burdens on commercial lenders and enable more efficient funding of infrastructure and industrial ventures such as roads, ports, and power plants.Effective October 1, 2025, the finalised project finance guidelines introduce sector-specific provisioning norms, ease penalties for delays, and provide clearer definitions for credit events. The revised rules come after extensive industry feedback and replace a more stringent draft issued under former RBI Governor Shaktikanta Das.One of the major reliefs for banks and NBFCs is the reduction in provisioning rates. For instance, provisioning for delayed projects has been scaled down from the earlier proposed 2.5 per cent to 0.4–0.6 per cent per quarter of delay, depending on whether the project is infrastructure or non-infrastructure. Projects that achieve financial closure before October 1, 2025, are exempt—unless impacted by defaults or major restructuring.In a shift from uniform provisioning, commercial real estate (CRE) projects will now attract 1.25 per cent provision during construction and 1 per cent during operations. CRE-residential housing is set at 1 per cent and 0.75 per cent, respectively, while other project types require only 1 per cent and 0.4 per cent.Importantly, the RBI has tightened the definition of 'credit events,' excluding ambiguous terms like 'NPV diminution' and focusing instead on material financial stress indicators, such as defaults or extensions of the Date of Commencement of Commercial Operations (DCCO).The updated framework also redefines financial closure as the stage where 90 per cent of funding is contractually committed, and ties regulatory approvals to milestone-based timelines rather than project closure dates—a shift expected to offer lenders and developers greater operational flexibility.For infrastructure projects, DCCO deferrals of up to three years are permitted, while non-infrastructure projects—including CRE—can defer by up to two years.Had the RBI retained the original draft guidelines, lenders with heavy exposure—such as Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), which together hold over ₹16 lakh crore in project loans—would have faced significant increases in provisioning, pressuring capital adequacy ratios and reducing profitability.The new norms are expected to encourage credit flow into long-gestation infrastructure projects, aligning regulatory requirements more closely with sectoral realities and project execution risks.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Hans India
an hour ago
- Hans India
India's forex reserves surge by $4.75 bn to scale $693.6 bn mark
Mumbai: India's foreign exchange reserves surged by $4.75 billion to $693.62 billion for the week ended August 8, data released by the RBI on Friday showed. A strengthening of the country's foreign exchange kitty reflects a strengthening of the country's macroeconomic fundamentals and gives the RBI more headroom to strengthen the rupee vis-a-vis the US dollar. A strong forex kitty enables the RBI to intervene in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall and curbing its volatility. For the week ending on Aug 8, foreign currency assets, a major component of the reserves, increased by $2.84 billion to $583.98 billion. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. The gold component of the forex reserves increased by $2.16 billion to $86.16 billion during the week. Central banks worldwide are increasingly accumulating gold as a safe-haven asset in their foreign exchange reserves amid uncertainty created by geopolitical tensions. The share of gold maintained by the Reserve Bank of India (RBI) as part of its foreign exchange reserves has almost doubled since 2021. The special drawing rights in the forex kitty stood at $18.74 billion. India's foreign exchange reserves are sufficient to fund more than 11 months of goods imports and about 96 per cent of external debt outstanding, RBI Governor Sanjay Malhotra said recently. The RBI Governor said, 'Overall, India's external sector remains resilient as key external sector vulnerability indicators continue to improve. We remain confident of meeting our external financing requirements.' Meanwhile, India's merchandise exports registered a 7.29 per cent increase to $37.24 billion in July this year, compared with the corresponding figure of $34.71 billion in the same month last year, according to official data released on Thursday. This shows a strengthening of the external sector. "Despite an uncertain global policy environment, India's services and merchandise exports in July and in FY26 so far have grown substantially, and are much higher than the global exports growth, Commerce Secretary Sunil Barthwal said. Major drivers of goods exports in July were engineering goods, electronics goods, drugs and pharma, organic and inorganic chemicals, gems and jewellery,' he pointed out.
Economic Times
an hour ago
- Economic Times
India's forex reserves rise $4.74 bn to $693.62 bn as of August 8
India's foreign exchange reserves increased significantly. The reserves rose by $4.74 billion, reaching $693.62 billion for the week ending August 8. Foreign currency assets also saw a rise. Gold reserves increased as well. The special drawing rights also went up. India's reserve position with the IMF experienced a positive change during the reporting week. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads India's forex reserves surged by $4.74 billion to $693.62 billion for the week ending August 8, data by the Reserve Bank of India showed on country's foreign exchange reserves stood at $688.87 billion as of August 1, down by $9.32 billion from the previous forex reserves had touched an all-time high of $704.885 billion in end-September the week ending on August 8, foreign currency assets, a major component of the reserves, increased $2.37 billion to $583.98 billion, the data released on Friday showed. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves were up by $2.16 billion to stand at $86.16 billion during the week, the RBI special drawing rights (SDR) were up $169 million to $18.74 billion, the central bank per the data, India's reserve position with the IMF was up by $45 million at $4.73 billion in the reporting the RBI, from time to time, intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing a steep depreciation in the RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band.
Time of India
2 hours ago
- Time of India
India's forex reserves rise $4.73 bn to $693.62 bn as of August 8
India's forex reserves surged by $4.74 billion to $693.62 billion for the week ending August 8, data by the Reserve Bank of India showed on Friday. Independence Day 2025 Modi signals new push for tech independence with local chips Before Trump, British used tariffs to kill Indian textile Bank of Azad Hind: When Netaji Subhas Chandra Bose gave India its own currency The country's foreign exchange reserves stood at $688.87 billion as of August 1, down by $9.32 billion from the previous week. The forex reserves had touched an all-time high of $704.885 billion in end-September 2024. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Undo For the week ending on August 8, foreign currency assets, a major component of the reserves, increased $2.37 billion to $583.98 billion, the data released on Friday showed. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. Gold reserves were up by $2.16 billion to stand at $86.16 billion during the week, the RBI said. Live Events The special drawing rights (SDR) were up $169 million to $18.74 billion, the central bank said. As per the data, India's reserve position with the IMF was up by $45 million at $4.73 billion in the reporting week. Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing a steep depreciation in the rupee. The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band.
