The Reserve Bank of India (RBI) has released its final guidelines titled “Reserve Bank of India (Project Finance) Directions, 2025”, which will come into effect from October 1, 2025. These new directions are aimed at creating a clear and consistent framework for banks and financial institutions that lend to large infrastructure and project-based businesses.
What Are the RBI Project Finance Directions?
The new guidelines follow the draft issued by the RBI on May 3, 2024, which sought public and stakeholder feedback on a Prudential Framework for:
Income recognition
Asset classification
Provisioning for advances given to projects under implementation
The final version of the guidelines was shaped after extensive consultation with around 70 stakeholders including banks, NBFCs, industry bodies, law firms, academicians, and government representatives.
Key Features of the RBI Project Finance Directions, 2025
1. Principle-Based Stress Resolution
The RBI has adopted a principle-based approach to handle stress in project finance loans. This will create a uniform standard across all regulated entities (REs) such as banks and NBFCs.
2. DCCO Extension Rationalisation
The guidelines clarify the rules around extending the Date of Commencement of Commercial Operations (DCCO):
Up to 3 years for infrastructure projects
Up to 2 years for non-infrastructure projects
REs can still assess and extend DCCO further based on commercial judgment.
3. Flexibility for Lenders
Banks and financial institutions will have more flexibility in extending DCCO beyond these standard limits if they believe it’s commercially justified.
4. Asset Provisioning Norms for Projects Under Construction
Standard provisioning is set at 1% for ongoing projects.
This provisioning will gradually increase each quarter for delayed DCCO.
For under-construction Commercial Real Estate (CRE), the provisioning is slightly higher at 1.25%.
5. Existing Projects With Financial Closure
Projects that have already achieved financial closure will follow the existing provisioning norms to avoid disruption.
6. Provisioning During Operational Phase
Once a project becomes operational:
CRE provisioning will be reduced to 1%
CRE-RH (Residential Housing) to 0.75%
Other project loans to 0.40%
When Do These Guidelines Take Effect?
The new RBI directions will officially apply from October 1, 2025. Financial institutions have time to align their lending practices and provisioning strategies before implementation.
Why This Matters
These new RBI guidelines are expected to:
Improve transparency in project lending
Reduce financial stress in large-scale infrastructure and commercial projects
Ensure a uniform and fair approach to loan classification and provisioning across banks and NBFCs
Conclusion
With the launch of the Project Finance Directions, 2025, the RBI is taking a big step towards improving the health of India’s infrastructure finance sector. These measures will help lenders manage risks better while ensuring smoother funding for long-term development projects.
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