In a bid to stimulate stalled infrastructure projects, the Reserve Bank of India (RBI) has finalized new lending norms that cut provisioning for under-construction infrastructure loans from 5% to just 1%, effective from October 1, 2025. Moody’s Ratings remarked this move “will reduce uncertainty in project financing and support medium-term growth”.
This change comes at a critical juncture: infrastructure credit has declined 0.8% between April 2024–25, as banks tightened lending due to past project defaults and sluggish performance among non-bank financiers. By lowering the upfront provisioning, the RBI aims to free up capital for fresh project funding and invigorate credit flow.
Furthermore, the guidelines introduce clearer timeframes—up to three extra years for infrastructure projects and two for others to meet commercial operation deadlines, shielding lenders from penalties during unavoidable delays.
While state-owned banks and NBFCs may incur a minor and one-time hit to profitability for loans sanctioned before the October deadline, Moody’s expects the long-term impact to be positive.
This shift not only boosts funding for roads, railways, ports, and power plants but also aligns with efforts by NaBFID and NBFCs to bridge India’s $1 trillion infrastructure financing gap. If sustained, this rule change could unlock robust loan growth and support large-scale national infrastructure development.
