The Reserve Bank of India (RBI)’s new Project Finance guidelines, effective October 1, 2025, introduce a unified framework for classifying, monitoring, and resolving project loans.

Key provisions include clear limits for DCCO extensions up to 3 years for infrastructure and 2 years for non-infra projects, along with calibrated provisioning norms – 1 to 1.25% during the construction period and 0.4 to 1.0% during the operation phase. The provisioning is based on outstanding exposure under a facility and not against the sanction itself. These guidelines recognise derisking of an Infrastructure project during the operational phase by reducing the provisioning requirement. The guidelines define “credit events” beyond defaults, mandate minimum exposure thresholds for Lenders, and enable structured resolution of stress. It enables recognising the need for resolution proactively, enabling the Lenders and the borrowers to work out a viable resolution plan before the asset quality deteriorates. This will prevent and preserve many infrastructure projects. These norms bring much-needed clarity to lenders and borrowers, ensuring transparency, accountability and consistency in treatment. By aligning classification criteria and provisioning with project risk profiles, the RBI ensures safeguards without stifling credit flow to long-gestation infrastructure projects. It also recognises the need to segregate the condition precedents based on the requirements of the concession and applicability of the condition relative to the phase of construction.