
New project finance norms to strengthen lenders' guardrails
The final directions, which will come into effect from October 1, 2025, asks only 1-1.25 per cent provisions from the date of commencement of commercial operations (DCCO) as against 5% proposed in the draft earlier.
The new guidelines cover both infrastructure and non-infrastructure projects, including commercial real estate -residential housing- and apply to banks, non-banking financial companies, housing finance companies, urban cooperative banks and all-India financial institutions.
The draft guidelines had laid out very stringent provisioning norms, with 5% provisioning on all under-construction projects, which went up to as high as 7.5% in some scenarios. Even for operational projects, provisioning level was mandated at 1% or 2.5% depending on the extent of operating cash flows of the project
"Compared to the draft of May 2024, the final directions improve the ease in doing business for lenders. The provisioning requirements are significantly lower, not only in the case of under-construction projects but also for operational projects. Additionally, the guidelines are applicable only on a prospective basis. As a result, the impact on credit costs would be well below what was envisaged earlier," Subha Sri Narayanan, a director with Crisil Ratings said in a note Thursday.

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