RBI's draft provisions create a flutter

The infrastructure financing world is abuzz with the Reserve Bank of India's (RBI) draft provisions for infrastructure lending.

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Even before the dust has settled, State Bank of India (SBI) has started altering its future loan agreements to cope with the potential impact of the RBI's proposed guidelines on project financing. SBI has introduced a new clause allowing it to "pass-through" any additional costs from increased provisioning directly to the borrower-possibly signalling an expectation that the RBI may not significantly relax these norms.

Meanwhile, the Ministry of Road Transport and Highways is advocating the status quo on current project finance formats and consequent lending rates. It is opposing any norm changes that could increase lending rates, and urges the central bank to ensure infrastructure financing costs, and therefore progress, are left unaffected in the national interest. The National Highways Authority of India has started consultations with the National Highways Builders Federation, which fears a significant increase in the financial burden if the RBI's draft proposals become a reality.