Key Points
The Reserve Bank of India (RBI) is contemplating a staggered implementation of the increase in provisioning for project financing to soften the blow on lenders and give them ample time to prepare for any impact on profitability..
Projects nearing completion may also be given some leeway in provisions, people familiar with RBI's plans said.. Facing flak from both lenders and the finance ministry, the central bank is treading a cautious line to ensure that the new norms don't lead to any cost escalation, making projects unviable..
However, it is determined to increase provisioning for such projects and implement them across regulated entities to plug emerging risks from a sector notorious for its delays...
Project finance lenders will be given enough time with due care taken to ensure funding for projects is not impacted," said a person directly aware of RBI's thinking..
The draft norms say that for projects where the date of commencement of commercial operations (DCCO) is cumulatively deferred for more than two years and one year for infrastructure and non-infrastructure projects, respectively, lenders shall maintain additional specific provisions of 2.5% over and above the applicable standard asset provision...
