The Reserve Bank of India (RBI) has relaxed the major criteria for the funding of the project, a step that is ready to reduce the burden that provides capital provisions on commercial lenders and to enable more efficient funding of industrial entrepreneurs such as infrastructure and industrial enterprises such as roads, ports and power plants.
Effective from October 1, 2025, final project finance guidelines introduce field-specific provision norms, reduce punishment for delay, and provide clear definitions for credit events. The revised rules come after a wider industry response and change a more rigorous draft issued under former RBI Governor Shaktishant Das.
One of the major relief for banks and NBFCs is a decrease in provision rates. For example, the provision for delayed projects has been reduced to the first proposed proposed 2.5 percent to 0.4–0.6 percent per quarter, depending on whether the project is a infrastructure or non-reception. Financial closing projects before October 1, 2025 provide exemption due to being affected by relaxation or major restructuring.
In shifts from uniform provisioning, commercial real estate (CRE) projects will now attract 1.25 percent provisions during construction and 1 percent during operation. Cre-housing housing is set to 1 percent and 0.75 percent respectively, while other project types require only 1 percent and 0.4 percent.
Importantly, the RBI has tightened the definition of “credit events”, such as except for vague words such as “NPV Demination” and focusing on physical financial stress indicators, such as the onset of the onset of commercial operations (DCCO).
The updated framework also re-defines the financial closure as a stage where 90 percent of the funding is contracted, and instead of the project closing dates, adds regulator approval for milestone-based time-based time-based time—st time-expectations are expected to offer more operational flexibility to users and developers.
For infrastructure projects, DCCOs up to three years are allowed, while non-infrastructure projects-include CREs-can defer to up to two years.
The RBI retained the original draft guidelines, heavy -risk lenders – such as the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC), which are in the grip of more than 16 lakh crores in project loans – have to face significant increase in provisions of more than 16 lakh crores – will have to face a significant increase in provisions, reducing the capital adequacy ratio and reducing profitable.
New criteria are expected to encourage credit flows in long -term infrastructure projects, align more closely with regional realities and project execution risks to regulatory requirements.
