The Reserve Bank of India (RBI) has eased provisioning norms for project financing, aligning them across banks, non-banking financial companies (NBFCs) and other regulated entities.

The move will make it cheaper for lenders to provide loans for infrastructure and industrial projects such as roads, ports and power plants.

The changes, to come into effect from 1 October, reduce general provisions for under-construction and operational projects.

The RBI’s new rules have mandated a provisioning requirement of 1.25% for commercial real estate (CRE) project loans which are under construction phase and 1% when operational; CRE residential housing would require 1% and 0.75%; others need 1% and 0.4%. 

In the draft guidelines issued in May last year, a flat 5% provisioning was proposed for under-construction project loans, 2.5% for those already operational and 1% once the project has adequate cash flow to repay obligations.

As per the final guidelines, penalties for project delays have been eased. According to the draft proposal, a delay beyond two years for infrastructure and one year for non-infrastructure attracted a 2.5% provision. Now, it’s reduced to about 0.4% and 0.6% per quarter of delay, respectively. Projects financially closed before 1 October 2025 are exempt - unless there's a credit event or major loan restructuring.

The RBI has also permitted infrastructure projects to defer date of commencement of commercial operations (DCCO) by up to three years, and for non-infra projects, including CRE and CRE-residential housing, by up to two years.

The draft norms allowed up to four years of extension of DCCO due to all types of risks including legal.

Project financiers like Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) stand to gain as they together hold over Rs 16 lakh crore in project loans.