Big RBI relief for project financiers

Only 1% provision in construction phase from Oct

- MANOJIT SAHA ABHIJIT LELE

In a huge relief to lenders, including commercial banks, the Reserve Bank of India (RBI) has mandated general provision of only 1 per cent of funded outstanding during the construction phase for all projects except for commercial real estate (CRE), as compared to 5 per cent proposed in the draft norms released in May last year.

The final norms on project finance, released on Thursday, would come into effect from October 1, 2025, the RBI said.

For CRE, the general provision requirement would be 1.25 per cent in construction phase while it would be 1 per cent for CREResidential Housing (RH).

During the operational phase- that is after commencement of repayment of interest and principal-the standard asset provisioning requirement will reduce to 1 per cent for CRE, 0.75 per cent for CRE-RH, and 0.4 per cent for other project exposures.

At present, standard asset provisioning for all projects except CRE is 0.4 per cent. For CRE, it is 1 per cent.