RBI Eases Infrastructure Loan Provisions to Unlock Project Finance

In response to surging infrastructure debt, the Reserve Bank of India has revised provisioning norms for loans tied to under-construction projects. Instead of the earlier directive to set aside five percent of total loan value, banks are now required to earmark just one percent for infra loans and 1.25 percent for commercial real estate until completion. This reduction is due to kick in from October of this year and follows extensive consultations with financial institutions expressing concern over possible credit slowdowns.

Banks have welcomed the change, citing improved risk-to-reward ratios for funding stalled or delayed projects. Several lenders expect to see an uptick in new project approvals and fresh disbursements in the next two quarters. Developers, too, are poised to benefit—reductions in provisioning can help ease liquidity constraints and fast-track construction timelines, especially in sectors like power, highways, and urban housing.

In the broader picture, the move aligns with the government’s push to revive unfinished infrastructure assets and strengthen economic foundations. With global capex also under pressure, these proactive steps may bolster investor confidence in India’s commitment to project delivery. Should project momentum build, employment generation and ancillary service growth could follow, reinforcing long-term financial system stability through improved balance sheets in the banking sector.