RBI Issues the Reserve Bank of India (Project Finance) Directions, 2025

The Reserve Bank of India stated in its press release dated June 19, 2025, that it had issued draft guidelines on ‘Prudential Framework for Income Recognition, Asset Classification and Provisioning pertaining to Advances Projects Under Implementation’ on May 3, 2024, in order to gain stakeholders’ feedback. The draft guidelines consisted of framework for the regulated entities for financing project loans, while taking into account the key risks.

The feedback was received from over 70 entities which include banks, NBFCs, industry associations, academicians, law firms, individuals and the Central Government. The final Directions have been announced by the RBI after taking into account the feedback received from stakeholders.

The final Directions include:

• Application of a principle-based regime for resolution of stress in project finance exposures, integrated across regulated entities.
• Rationalization of permissible ‘data of commencement of commercial operations’ (DCCO) extensions with an all-inclusive ceiling of three and two years for infrastructure and non-infrastructure sectors, respectively.
• Allowance of greater flexibility to REs in extending the DCCO within the above ceilings, founded upon their commercial assessments.
• Rationalization of standard asset provisioning necessities to 1% for projects under construction that shall progressively increase for each quarter of DCCO deferment. The requirements for under construction CRE exposures will be a bit higher at 1.25%.
• Under construction projects where financial closure has been formerly attained shall continue to gain guidance by extant provisioning norms in order to facilitate a seamless implementation.
• During the time of the operational phase, the standard asset provisioning requirement shall be reduced to 1% for CRE, 0.75% for CRE-RH and 0.40% for other project exposures, respectively.

These Directions will be implemented from October 1, 2025.