The Reserve Bank of India (RBI) has announced significant relief measures for banks and financial institutions involved in project financing, particularly in the infrastructure and commercial real estate (CRE) sectors. The central bank has reduced the provisioning requirements and allowed greater flexibility in project deadline extensions, aimed at improving credit flow and easing the financial burden on lenders.
🔍 Key Highlights of the New Norms
Lower Provisioning:
Banks must now set aside only 1% for under-construction infrastructure projects and 1.25% for commercial real estate projects. This is a major cut from the previously proposed 5% in RBI's earlier draft.
Deadline Extensions Without Reclassification:
Banks can now extend the Commercial Operation Date (COD) by up to:
3 years for infrastructure projects
2 years for non-infrastructure projects
without classifying them as restructured or stressed assets.
Effective Date:
These revised norms will be applicable from October 1, 2025 and will not impact projects sanctioned prior to this date.
Market Response:
Following the announcement, shares of key project financiers like REC and PFC surged by up to 4%, reflecting positive market sentiment.
🗣️ RBI’s Rationale
The central bank said the changes were made to "align provisioning practices with actual risk" while continuing to ensure prudential lending standards. The move is expected to bolster long-term project funding without inflating banks’ capital burden.
“This policy is part of RBI's broader efforts to support infrastructure growth and ensure smoother implementation of large-scale projects,” said experts from the banking industry.
✅ Frequently Asked Questions (FAQs)
Q1. What are the new RBI norms for project loan provisioning?
RBI has reduced the standard provisioning requirement to 1% for infrastructure projects and 1.25% for commercial real estate (CRE) loans, effective October 1, 2025.
Q2. Who will benefit from these relaxed norms?
Banks, NBFCs, and project financiers such as REC and PFC stand to benefit through lower capital requirements and improved liquidity.
Q3. Are the new norms applicable to old or ongoing projects?
No. The revised norms will only apply to new loans sanctioned on or after October 1, 2025. Ongoing projects will continue under the existing rules.
Q4. Has the RBI allowed deadline extensions for delayed projects?
Yes. RBI now allows deadline extensions of up to 3 years for infrastructure projects and 2 years for non-infrastructure projects without classifying them as restructured assets.
Published on 20 june
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