The Reserve Bank of India (RBI) Bank of India had released draft guidelines titled โPrudential Framework for Income Recognition, Asset Classification and Provisioning pertaining to Advances โ Projects Under Implementationโ on May 3, 2024, inviting stakeholder comments. These draft guidelines aimed to provide a structured yet flexible framework for regulated entities (โREsโ) to finance project loans while addressing associated credit risks.
Pursuant to the consultation process, the Reserve Bank of India (RBI) Bank received inputs from various stakeholders, leading to issuance of the final Reserve Bank of India (Project Finance) Directions, 2025, key features of which include:
1. A ๐ฉ๐ซ๐ข๐ง๐๐ข๐ฉ๐ฅ๐-๐๐๐ฌ๐๐ ๐๐ฉ๐ฉ๐ซ๐จ๐๐๐ก for stress resolution in project finance exposures, with uniform application across all regulated entities;
2. Streamlined guidelines on extensions for the โDate of Commencement of Commercial Operationsโ (โ๐๐๐๐โ), capped at three years for infrastructure projects and two years for non-infrastructure projects;
3. ๐๐ง๐ก๐๐ง๐๐๐ ๐๐ฎ๐ญ๐จ๐ง๐จ๐ฆ๐ฒ ๐๐จ๐ซ ๐๐๐ฌ to determine DCCO extensions within these ceilings based on their own commercial assessment;
4. Standard asset provisioning for under-construction projects set at 1%, increasing progressively with each quarter of DCCO deferment. For under- construction commercial real estate (โCREโ) projects, a higher initial provisioning rate of 1.25% will apply;
5. Projects that have already achieved financial closure will continue to be governed by the existing provisioning norms to ensure smooth transition;
6. During operational phase, standard asset provisioning shall be reduced to:
i. 1.00% for CRE,
ii. 0.75% for CRE โ Residential Housing (CRE-RH),
iii. 0.40% for all other project finance exposures. These Directions will come into effect from October 1, 2025.
The RBI press release can be accessed at https://lnkd.in/d-Ap-8Ns.