RBI Project Finance Directions 2025
The Reserve Bank of India (RBI) has issued new guidelines for project finance as of 2025. These guidelines aim to improve the financial stability of Regulated Entities (REs) while addressing risks associated with project loans. The new directions establish a framework for provisioning requirements for loans related to under-construction projects in Commercial Real Estate (CRE) and infrastructure.
Key Provisions for Under-Construction Projects
Under the new guidelines, REs must maintain a general provision of 1.25% for under-construction CRE loans and 1% for infrastructure projects. This is reduction from the previously proposed 5%. The provisioning rate will decrease further when projects reach operational phases.
Operational Phase Requirements
Once projects enter the operational phase, the provisioning requirements change. For CRE projects, the requirement drops to 1%. For Residential Housing (CRE-RH), it is set at 0.75%. Other project exposures will need a provision of 0.40%. This tiered approach helps manage risk as projects progress.
Date of Commencement of Commercial Operations (DCCO)
The guidelines rationalise the permissible extensions for the DCCO. Infrastructure projects can have a maximum extension of three years, while non-infrastructure projects are limited to two years. This flexibility allows REs to make decisions based on commercial assessments while ensuring accountability.
Provisioning for Deferred DCCO
If a project’s DCCO is deferred, additional specific provisions are required. For infrastructure loans, this is 0.375% for each quarter of deferment. For non-infrastructure loans, it is 0.5625%. These measures aim to ensure that lenders are prepared for potential risks arising from project delays.
Monitoring and Reporting Requirements
The RBI mandates ongoing monitoring of project performance during the construction phase. Lenders must initiate resolution plans promptly if stress is detected. Any credit events must be reported to the Central Repository of Information on Large Credit (CRILC), ensuring transparency and accountability.
Land Acquisition Requirements
Before disbursing funds, lenders must verify land availability. They need 50% land acquisition for infrastructure projects under Public-Private Partnership (PPP) models and 75% for other projects. This requirement ensures that projects are viable and reduces the risk of delays.
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