RBI relief for project finance, only 1% provision in construction phase

Banks welcome RBI's final project finance guidelines that lower provisioning to 1 per cent during construction and exempt existing projects from higher requirements

In a huge relief to lenders, including commercial banks, the Reserve Bank of India (RBI) has mandated general provision of only 1 per cent of funded outstanding during the construction phase for all projects except for commercial real estate (CRE), as compared to 5 per cent proposed in the draft norms released in May last year. 

The final norms on project finance, released on Thursday, would come into effect from October 1, 2025, the RBI said. 

For CRE, the general provision requirement would be 1.25 per cent in construction phase while it would be 1 per cent for CRE-Residential Housing