The Reserve Bank of India (RBI) on Thursday, June 19, unveiled its project financing directives, stipulating that lenders must maintain a general provisioning of 1.25% on commercial real estate, and 1% each on commercial real estate — residential housing, and other portfolio, during the construction phase.
The directives will come into effect from October 1, 2025.
This was much lower than the 5% provisioning proposed in the draft rules for all project finance, irrespective of the sector-specific default risk — something that stakeholders had expressed reservations about.
Banks will have to maintain 1% general provisioning on commercial real estate projects during the operational phase after commencement of repayment of interest and principal; 0.75% on residential housing; and 0.40% on all other projects, the central bank said.
In May 2024, the RBI consulted with around 70 entities, including banks, NBFCs, and industry associations, on the draft guidelines for the ‘Prudential Framework for Income Recognition, Asset Classification and Provisioning pertaining to Advances — Projects Under Implementation.’
The new directives will also allow banks to extend the permissible date of commencement of commercial operations (DCCO) with an overall ceiling of two and three years for infrastructure and non-infrastructure sectors, respectively.
Under-construction projects where financial closure has already been achieved, will continue to be guided by the extant provisioning norms, the RBI added.
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(Edited by : Shoma Bhattacharjee)
First Published: Jun 19, 2025 6:14 PM IST
