RBI issues guidelines on project financing by Regulated Entities

According to the circular, these Directions lay down revised regulatory dispensations for changes in the date of commencement of commercial operations (DCCO) of such projects in the backdrop of a review of the extant instructions and analysis of the risks inherent in such financing.

These Directions are issued to provide a harmonized prudential framework for financing projects in the Infrastructure, Non-Infrastructure, and Commercial Real Estate sectors by regulated entities (REs).

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For any project, all mandatory pre-requisites should be in place before financial closure. An indicative list of such prerequisites includes the availability of encumbrance-free land and/or right of way, environmental clearance, legal clearance, regulatory clearances, etc., as applicable for the project. However, for infrastructure projects under the PPP model, land availability to the extent of 50% or more can be considered sufficient by lenders to achieve financial closure.

In projects financed under consortium arrangements, where the aggregate exposure of the participant lenders to the project is up to Rs 1,500 crores, no individual lender shall have an exposure that is less than 10% of the aggregate exposure. For projects where the aggregate exposure of lenders is more than Rs 1,500 crores, this individual exposure floor shall be 5% or Rs 150 crores, whichever is higher.

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In respect of infrastructure projects under the PPP model awarded by a Statutory Authority, the DCCO documented in the financial closure document may be modified to reflect any change in the ‘Appointed Date’ by the Concession Authority before disbursement of funds by way of a supplementary agreement between the lender/s and the sponsor subject to reassessment of project viability and obtention of sanction from appropriate authorities.

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