Mumbai: Reserve Bank of India (RBI) on Thursday released standards for providing project financing after the dismissal of creditors.
In its final instructions, RBI has ordered banks to allocate only 1% of the standard provision of assets for construction projects. However, it maintained a requirement to ensure operating projects at 0.4%. The requirement to ensure loans of commercial real estate with insufficient construction will be slightly higher to 1.25%.
New standards will enter into force from October.
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This is the main relaxation of the proposals of instructions published in May last year, which proposed that creditors must set aside 5% of the loan amount-for the potential loss-for insufficient construction project, 2.5% for those who already work and 1% as soon as the project has a reasonable cash flow for obligations.
“The rationalization of a standard requirement to ensure assets of 1% for construction projects, which is gradually increasing for each quarter of DCCO (start of commercial operations),” RBI said.
Separately RBI allowed to postpone the start date of commercial operations for up to three years for infrastructure projects and up to two years for projects without infra.
This is a bit harder of design standards that allowed up to four years to extend DCCO due to all types of risks, including legal.
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“The final instructions concerning the project financing are relief to creditors in terms of operational projects, the existing requirement continues at 0.4%, which is less than 1%/2.5%stated in the earlier proposal. 1%VIS-A-VIS is stored for the project financing.
It is considered to be a limited impact on NBFC because sufficient provisions are provided as expected assessment of credit losses and the provision is currently in detail. “The provisions are also applicable prospectively, since October 2025, and therefore the overall impact on the creditors must be limited,” he added.
RBI, under the governor of Sanjay Malhotra, takes steps to stimulate credit demand. Since January, the central bank has reduced risk weights on bank loans to small debtors and non -banking creditors, alleviated the rules for loans for golden small tickets and relaxed rules on strict liquidity requirements for banks.
In its final instructions, RBI retained at least 10% of the summary exhibition for insufficient construction projects where the summary exposition of creditors on £1 500 crore.
For projects where there is an aggregated exhibition of all creditors more than £1,500 crore, exposure floor for individual creditors must be 5% or £150 crore, depending on what is higher.
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RBI released the conditions for the payment of funds. According to new standards, infrastructure projects within the public and private sector partnerships (PPP) must provide only 50% of the land available before payday. For NEPP projects and commercial properties, this requirement was bound to 75%. Currently, the projects of the National Highway Office in India under the annual model must ensure that 90% of the land is available before the payout.
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