Lenders have been cautious about project financing after the Reserve Bank of India released draft guidelines for prudential treatment of the ongoing projects in May 2024, and are likely afraid of the impact of provisioning on the bottom line.
This is 29% lower total costs for projects approved by banks and financial institutions in the first nine months of the current fiscal year, 29% lower at Rs 1.94 lakh, 29% lower than last year, compared to Rs 2.72 lakh It can be measured by the fact that it is lowered. Period per RBI data.
This decline is in the background of RBI’s “issuing draft guidelines on the Prudential Framework for advances in revenue recognition, asset classification and provisioning (IRACP) on exposure to projects being implemented at various stages.
However, this could change in the future as RBI Governor Sanjay Malhotra said at a bimonthly monetary policy press conference that he would weigh the interests of all stakeholders before implementing the aforementioned instructions. .
RBI GUV Guarantee
The governor noted that the RBI has received stakeholder comments/suggestions regarding the Circular draft and is investigating it.
He emphasized that regulations can be framed in such a way that they address concerns of the public, depositors and banks at the same time and keep track of efficient use of resources.
Q3 Project Finance
According to the latest RBI Monthly Breaking Report, project finance data collected from certain banks and financial institutions (FIs) was found to be the third quarter of 2024-25 (October to December) when banks and FIs were found to be the same. It shows that there was a total cost for the approved project at approximately 97,996 crores. It was slightly ahead of the previous quarter’s 96,226 crores.
Approximately 70% of the intended investment was concentrated in the “electricity”, “metals” and “roads and bridges” industries.
Furthermore, in the third quarter of 2024-25, funds raised through ECB (external commercial borrowing) and IPO (initial public disclosure) for CAPEX purposes (from 2024) compared to the previous quarter’s 31,027 crore. It was 35,893 crores in the third quarter of 2025.
RBI Draft Circular Evaluation
Report care assessments have a direct impact on the cost of debt when a rapid increase in standard assets provision increases sharply to 5% (from 0.40%) of all fresh and existing project loans under construction. I warned him. As a result, this will reduce bid appetite from infrastructure developers over the medium term.
“A cost overrun of less than 25% (due to scope changes) projects face asset classification-related challenges and an increased financial burden on project sponsors.
“If existing pre-drainage conditions lead to an unfair delay in achieving a financial closure, changing the conditions of existing pre-drainage conditions before the existing pre-drainage conditions lead to an unfair delay in achieving a fiscal closure.” the agency said.
Furthermore, limiting the allowable timeline for the cumulative deferral of DCCO (commercial operational start date) from the previous limit of four years to three years, including the reasons for the lawsuit, is considered strict.
As the litigation case needs to be resolved longer, this change could result in reclassification of such exposures (the end of lender) and step up borrowing costs during the implementation phase.
