The Reserve Bank on Thursday issued norms to provide a harmonised framework for financing of projects in infrastructure and non-infrastructure sectors by banks, NBFCs and other regulated entities. The Reserve Bank of India (Project Finance) Directions, 2025 lay down the revised regulatory treatment upon change in the ‘date of commencement of commercial operations’ (DCCO) of such projects in the backdrop of a review of the extant instructions and analysis of the risks inherent in such financing.
The RBI said the directions entail the adoption of a principle-based regime for resolution of stress in project finance exposures, harmonised across regulated entities (REs). It also entails rationalisation of permissible DCCO extensions with an overall ceiling of three years and two years for infrastructure and non-infrastructure sectors, respectively.
For the purpose of application of prudential guidelines contained in the latest norms, projects have been broadly divided into three phases — design phase, construction phase, and operational phase.
“In under-construction projects where the aggregate exposure of the lenders is up to Rs 1,500 crore, no individual lender shall have an exposure which is less than 10 per cent of the aggregate exposure,” the RBI said.
For projects where aggregate exposure of all lenders is more than Rs 1,500 crore, the exposure floor for an individual lender shall be 5 per cent or Rs 150 crore, whichever is higher.
Further, a lender shall ensure that all applicable approvals/clearances for implementing/ constructing the project are obtained before financial closure. An indicative list of such pre-requisite approvals/clearances includes environmental clearance, legal clearance, regulatory clearances, as applicable to the project, the RBI said.
On resolution of stress, it said a lender shall monitor the performance of the project and any buildup of stress on an ongoing basis and shall be expected to initiate a resolution plan well in advance.
“Occurrence of a credit event with any of the lenders during the construction phase, shall trigger a collective resolution in terms of the prudential framework,” RBI said and added the reference to ‘default’ in the prudential framework shall be read as ‘credit event’ for the purpose of project finance accounts, unless specified otherwise.
The RBI also said that a project finance account downgraded to NPA for non-compliance can be upgraded only after the account performs satisfactorily post actual DCCO.
It further said a lender may recognise income on accrual basis in respect of project finance exposures which are classified as ‘Standard’. For NPAs, income recognition shall be as per extant instructions.
The Reserve Bank of India (Project Finance) Directions, 2025 shall come into force with effect from October 1, 2025, the central bank said.
In May 2024, the RBI had issued draft guidelines on ‘Prudential Framework for Income Recognition, Asset Classification and Provisioning pertaining to Advances – Projects Under Implementation’.
As part of the stakeholder consultation exercise, inputs/ feedback were received from around 70 entities, including banks, NBFCs, industry associations, academicians, law firms, individuals and the Central Government, the RBI said.
The RBI said the inputs/ feedback received were examined and suitably incorporated while formalising the final directions.
