Project financing new rules from Oct 1: NaBFID says norms will bring discipline in lending

The Reserve Bank of India (RBI) announced revised project finance guidelines earlier this year, with the framework now set to be implemented from October 1. According to BS Venkatesha, Deputy Managing Director (DMD) and Chief Risk Officer (CRO), NaBFID, the new norms are designed to bring discipline in lending, enhance transparency, and strengthen risk management across banks and financial institutions.

The new guidelines require lenders to maintain:

• 1.25% general provision on Commercial Real Estate (CRE) projects during construction.


• 1% on CRE-Residential Housing (CRE-RH) and other portfolios during construction.

After projects reach commercial operation, provisions reduce to 1% for CRE, 0.75% for CRE-RH, and 0.40% for other projects.

“The project norms have been calibrated to 1% with graded reductions at commercial operation. It balances growth and risk effectively, supporting healthy project financing," Venkatesha said.

Clarity and uniformity across lenders

The norms provide precise definitions and risk assessment standards, eliminating previous regulatory arbitrage.

Venkatesha noted, “All lenders will now assess project finance risk consistently, creating a level playing field and accelerating resolution when issues arise.”

Commercial operation date and moratorium flexibility

The commercial operation date (DCCO) has been rationalised, offering a general three-year window for project commencement. Moratoriums remain flexible, allowing repayments to be made through project cash flows rather than promoter equity, which is essential for non-recourse lending.

Monitoring, transparency and responsible lending

Banks must maintain detailed project finance databases and publicly disclose portfolio information.

Participation rules ensure that only serious lenders engage, with minimum and maximum stake requirements.

Venkatesha explained, “This discipline ensures quicker decision-making and reduces the risk of delays or disputes in project financing.”

Risk management and early warning

The guidelines align with expected credit loss (ECL) frameworks, allowing early recognition of project risks without impacting bank balance sheets.

“Construction and approval risks are inherent in project finance. These norms ensure proper risk pricing while supporting infrastructure growth,” Venkatesha added.

Impact on borrowers and co-lending opportunities

Borrowers are unlikely to see immediate changes in lending volumes or cost of credit. The norms are expected to encourage co-lending among banks and NBFCs for high-value infrastructure projects, facilitating better risk-sharing and participation.

NaBFID’s role in transition

NaBFID will support a smooth transition to the new framework.

“Sufficient time has been given, and stakeholder feedback incorporated. The transition will largely be seamless,” Venkatesha said.

Complementary structural reforms

These project finance norms complement existing structural reforms such as concession agreements, flexible execution policies, and viability gap funding.

Such measures have matured the infrastructure financing market, attracting private equity and foreign investment, even in greenfield projects.