The Reserve Bank of India (“RBI”) has issued Reserve Bank of India (Project Finance) Directions, 2025 (“Directions”). These Directions are issued to provide a harmonised framework for financing of projects in infrastructure and non-infrastructure (including commercial real estate & commercial real estate- residential housing) sectors by Regulated Entities (“REs”).
These Directions shall come into force with effect from October 01, 2025.
These Directions shall apply to the project finance exposures of the following regulated entities (“Lenders”):
- All Commercial Banks (including Small Finance Banks but excluding Payments Banks, Local Area Banks and Regional Rural Banks)
- All Non-Banking Financial Companies (“NBFCs”) (including Housing Finance Companies)
- All Primary (Urban) Cooperative Banks
- All India Financial Institutions (“AIFIs”)
Key Highlights of the Directions:
- The Directions classify Projects broadly into three phases, namely:
(a) Design phase – This is the first phase which starts with the genesis of the project and includes, designing, planning, obtaining all applicable clearances/approvals till its financial closure.
(b) Construction phase – This is the second phase which begins after the financial closure and ends on the day before the actual date of commencement of commercial operations (“DCCO”).
(c) Operational Phase –This is the last phase which starts with commencement of commercial operation by the project on the day of the actual DCCO and ends with full repayment of the project finance exposure.
- The Directions state in case of under-construction projects where the aggregate exposure of the lenders is up to ₹1,500 crores, no individual lender shall have an exposure which is less than 10% of the aggregate exposure. For projects where aggregate exposure of all lenders is more than ₹1,500 crores, the exposure floor for an individual lender shall be 5% or ₹150 crores, whichever is higher.
- The Lenders are required to ensure that all applicable approvals/clearances for implementing/constructing the project are obtained before financial closure.
- Lenders must ensure availability of sufficient land/right of way for all projects before disbursement of funds, subject to the following minimum requirements:
(a) For infrastructure projects under PPP model – 50%
(b) For all other projects (non-PPP infrastructure, and non-infrastructure including CRE & CRE-RH) – 75%
(c) For transmission line projects – as decided by a lender
- Lenders are required to maintain project specific data, in electronic and easily accessible format on an ongoing basis.
- The Directions also contain provisions regarding income recognition, provisioning for standard assets, resolution of stress etc.
The notification is hyperlinked below for your ease of reference.
Source: Reserve Bank of India
