RBI issues draft for Project Finance Loans by Bank and Non-Bank lenders

In a major reform, the Reserve Bank of India has revised the guidelines for project finance loans issued by banks and non-bank lenders.

Coming into effect from October 1, 2025, the new reforms explains that under construction projects possess a 1% standard asset provisioning in comparison with the 5% requirement proposed in the draft norms released in May 2024.

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In the final norms, it is proposed that the standard asset provisions shall rise for each quarter of the date of commencement of commercial operations in case of postponement. However, the requirement for the under construction CRE exposures is slightly higher at 1.25%.

In case of accounts, availing DCCO deferment and are classified as ‘standard’, lenders shall maintain additional specific provisions of 0.375% for infrastructure project loans and 0.5625% for non-infrastructure project loans, the central bank stated.

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The central bank has affirmed rationalization of permissible DCCO extensions with an overall ceiling of three and two years for infrastructure and non-infrastructure sectors, respectively.

Last year, the draft norms released were opposed by lenders, who saw the provisioning requirement as too hectic and difficult. A 5% standard asset provision is recommended in draft norms for under construction projects that would be achieved in a impressive manner over the time. The project once reached the operational phase, would be brought down to 2.5% provisioning.

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