Tweak draft project loan financing norms

Instead of a blanket 12-fold jump in the provision requirement, the RBI can ask lenders to create project finance reserves on their balance sheets

On May 3, the Reserve Bank of India (RBI) released a draft direction outlining the prudential framework for project loan financing. The objective is to strengthen the existing regulatory framework and harmonise the norms across the lending community, including all kinds of banks, financial institutions, and non-banking financial companies (NBFCs).

The regulator has invited comments on the draft direction by June 15. Better late than never. Let me offer some comments and feedback through this column.

Indeed, there are many positives in the draft norms. For instance, in projects financed under consortium arrangements, where the aggregate exposure of the