Latest news with #DateofCommencementofCommercialOperations
Time of India
2 hours ago
- Business
- Time of India
RBI's New Project Loan Guidelines to Transform Infrastructure Financing, ET Infra
Advt 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 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 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 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 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 infrastructure projects, DCCO deferrals of up to three years are permitted, while non-infrastructure projects—including CRE—can defer by up to two 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 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.
Indian Express
13 hours ago
- Business
- Indian Express
RBI relaxes norms for financing of project loans
The Reserve Bank of India (RBI) on Thursday rationalised the guidelines for financing project loans undertaken by banks and non-banking financial companies. The new norms will come into effect from October 1, 2025. In the final norms, the RBI has reduced the standard asset provisioning requirement to 1 per cent for projects that are under construction. In the draft guidelines, issued in May last year, the RBI had asked lenders to maintain a general provision of 5 per cent of the funded outstanding on exposure to projects under implementation at various stages. Project finance refers to the method of funding a project in which the revenues to be generated by the funded project serve as the primary security for the loan, and also as a source of repayment. 'Rationalisation of standard asset provisioning requirement to 1 per cent for projects under construction, which shall gradually increase for each quarter of Date of Commencement of Commercial Operations (DCCO) deferment,' the final norms said. DCCO is the date by which the project is expected to be put to commercial use and completion certificate/provisional completion certificate is issued to the concessionaire. The RBI said that requirements for under-construction commercial real estate (CRE) exposures will be, however, slightly higher at 1.25 per cent. For accounts that have availed of DCCO deferment, lenders will maintain an additional specific provision of 0.375 per cent for infrastructure project loans and 0.5625 per cent for non-infrastructure project loans (including CRE and CRE-Residential Housing), for each quarter of deferment, over and above the applicable standard asset provision. For the applicability of the new norms, the RBI said that projects will be divided into three phases – design phase, construction phase and operational phase. The RBI said that for all projects financed by a lender, it should ensure that financial closure has been achieved and original DCCO is clearly spelt out and documented prior to disbursement of funds; the project specific disbursement schedule vis-à-vis stage of completion of the project is included in the loan agreement; and the post-DCCO repayment schedule has been realistically designed to factor in the initial cash flows. In under-construction projects where the aggregate exposure of the lenders is up to Rs 1,500 crore, the RBI said that no individual lender will have an exposure which is less than 10 per cent of the aggregate exposure. For projects where aggregate exposure of all lenders is more than Rs 1,500 crore, the exposure floor for an individual lender shall be 5 per cent or Rs 150 crore, whichever is higher. A lender should ensure availability of sufficient land/right of way for all projects before disbursement of funds. As per the new norms, a lender will monitor the performance of the project and any build-up of stress on an ongoing basis and will be expected to initiate a resolution plan well in advance.
