Relief Rally: IREDA, PFC, REC Surge as RBI Slashes Provisioning Burden

Reserve Bank of India (RBI) has issued final guidelines on provisioning for project finance, giving a huge relief to banks and NBFCs. The new norms effective from October 1, 2025, ease the provisioning requirement on lenders, especially lending to infrastructure and real estate projects.

Key Highlights:

Relief Provision: RBI has reduced the standard asset provisioning for underconstruction projects to 1%, from the 5% proposed in May 2024. For CREresidential housing, it is 1.25%, and for CRE, 1%.
Operational Phase Norms: When projects are in operational phase, provisioning is reduced to 1% for CRE, 0.75% for CRERH, and 0.40% for other projects, releasing longterm capital burden.
Market Reaction: Shares of IREDA, PFC, REC, HUDCO, and IRFC rose in the first trade on June 20, as the investors took comfort in the reduced regulatory overhang.
Sectoral Impact: The action is intended to spur infrastructure lending, with experts pointing out that the eased norms will reduce the cost of credit and improve the viability of projects.
Expert Opinion: Emkay Global and Citi Research have referred to the guidelines as "lenderfriendly," while ICRA indicated the negligible impact on NBFCs due to provisioning buffers that exist.
Scope of Implementation: The standards are applicable prospectively, thereby excluding existing projects from being impacted, further reducing capital disruption.

With this regulatory reboot, the RBI has achieved a balance between credit flow and prudential regulation, giving a fillip to India's infrastructure dreams at the right moment.

Sources: Moneycontrol, Economic Times, Financial Express