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News: RBI has announced norms for project finance, with provisioning requirements significantly lower at 1–1.25% during the construction phase, compared to 5% proposed in earlier draft. Lenders must maintain a general provision of 1.25% for commercial real estate and 1% for other infra projects including residential housing CRE. Provisioning in the operational phase will depend on project ratings, with flexibility to use internal or RBI-approved external ratings. Extension of up to 2/ 3 years for non-infra/ infra projects is allowed without any downgrade subject to certain conditions. The revised norms aim to enhance infrastructure credit flow will be effective from October 1, 2025.
View: Lower provisioning requirement compared to proposed eases anticipated burden on lenders, thus being positive. Exclusion of existing projects which have achieved financial closure is seen as a substantial breather.
Impact: Positive