The RBI's assistance with project finance loans is a positive move, according to Banking Central.

Everyone will benefit from the Reserve Bank of India's (RBI) final project finance guidelines, which go into effect on October 1, 2025. The final regulations have somewhat relaxed the stricter provisioning criteria found in the May 2024 draft rules. These regulations, which control how banks and non-banking financial corporations (NBFCs) finance major real estate and infrastructure projects, are designed to increase risk control without stifling credit. The Reserve Bank of India’s (RBI) final project finance guidelines, effective from October 1, 2025, have been welcomed by the banking and financial community for offering much-needed flexibility. The final version comes after the May 2024 draft triggered significant concern across the sector by proposing strict provisioning norms. The initial draft required banks and non-banking financial companies (NBFCs) to set aside 5 percent of the loan amount for projects under construction, a steep jump from the existing 0.4 percent. This would have put tremendous pressure on lenders’ capital, potentially limiting their ability to extend loans to other segments like retail and small businesses. Recognizing the practical challenges, the RBI has softened its approach in the final guidelines. The revised norms continue to prioritize risk management but in a way that won’t choke credit supply to essential infrastructure and real estate sectors. By easing the provisioning requirement, the central bank has ensured that banks can continue to finance large projects without locking up excessive amounts of capital, which would have slowed down overall credit growth. The updated guidelines demonstrate the RBI’s responsiveness to industry feedback, showcasing a balanced regulatory stance. The central bank has managed to reinforce its goal of strengthening the financial system without disrupting the funding pipeline for critical sectors. These changes are expected to encourage banks to actively participate in long-term project financing while maintaining prudent risk controls. Overall, the RBI’s final decision is seen as a positive and growth-oriented step that safeguards financial stability while supporting India’s infrastructure development goals. When the draft rules proposed a drastic 5 percent provisioning requirement for loans to projects under development, a sharp increase from the current 0.4 percent, they sent shockwaves across the banking industry. Such a mandate would have compelled bankers to lock up billions of dollars in cash in the real world, which may have limited their capacity to finance everything from house loans to small business loans.