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RBI’s New Project Finance Norms Provide Relief to NBFCs as REC and PFC Set for Growth.

Banking & Finance | Dated: 23 Jun 2025

In mid‑June 2025, the Reserve Bank of India (RBI) released the final Project Finance Directions, 2025, significantly easing provisioning norms for infrastructure and commercial real estate loans. This reform provides much-needed regulatory clarity and relief to banks and NBFCs like REC and PFC.

🎯 Key Highlights:

  • - Under the new norms effective from October 1, 2025, RBI has slashed provisioning requirements for under-construction infrastructure projects from the proposed 5% to 1%, and for under-construction commercial real estate from 2.5% to 1.25%.
  • - Existing projects will remain under old rules to avoid disruption groww.in +4 reuters.com +4 business-standard.com +4 . The Directions also cap extensions for date-of-commencement (DCCO) at 3 years (infrastructure) and 2 years (non-infra).
  • - The new framework replaces multiple legacy circulars with a harmonized, principle-based regime covering banks, NBFCs, and cooperative lenders. It includes guidelines on income recognition, asset classification, and exposure limits, reducing compliance complexity and boosting credit environment predictability.

💡 Other Important Facts:

  • (i) Shares of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) surged between 3.3% to 6% following the announcement, reflecting investor optimism. Analysts such as Motilal Oswal have reaffirmed buy ratings, with target prices of ₹485 for PFC and ₹460 for REC.
  • (ii) Market commentators highlight that the norms impose minimal profitability impact, with provisioning increases remaining under 1% even in worst-case scenarios. The softened rules are seen as removing major hurdles for long-term infrastructure finance, supporting anticipated credit growth in FY26.
  • (iii) RBI’s policy fits into a broader agenda under Governor Sanjay Malhotra, which includes easing priority-sector lending for small finance banks and calibrating borrowing norms for non-bank lenders. Implementation of project finance norms from October 2025 gives lenders time to adjust while ensuring sustained funding to infrastructure and real estate sectors.

📚 Test Your Knowledge:

According to the recently released RBI norms (2025), what is the new provisioning requirement for under-construction infrastructure projects?

Correct Answer: 1%

🚀 Quick Recap:

About RBI

  • Governor : Sanjay Malhotra
  • Headquarter : Mumbai