The Motilal Oswal report predicts that RBIs project financing norms will have a minimal effect on bank and NBFC profitability and financial statements. The final guidelines which start on October 1 reduce provisioning requirements to 1% during construction and 0.4% after the Date of Commencement of Commercial Operations (DCCO).
The report indicates that existing loan books remain unaffected which prevents any immediate financial pressure on institutions. The additional provisioning expenses for new project loans will probably be transferred to borrowers through modified interest rates during periods of decreasing interest rates.
The RBI established a new project financing framework which combines stress resolution principles for all regulated entities through a balanced approach. The RBI gathered feedback from about 70 stakeholders including banks and NBFCs and government bodies and industry experts to develop the final framework.
The relaxed norms will facilitate project finance operations while decreasing capital requirements and preserving prudent risk management standards according to experts. The move serves as a strategic advantage for long-term infrastructure lending throughout India.
