From The Economic Times · Dheeraj Tiwari · · 1m 20s
Banks unite on project finance lending rules
Indian banks are creating a common framework for project loans to stop regulatory gaps and conflicting classifications among lenders.
In brief
Indian banks are creating a common framework for project loans to stop regulatory gaps and conflicting classifications among lenders. Banks are aligning project finance standards to prevent regulatory arbitrage and ensure consistent loan classifications across consortium lenders. Originally reported by The Economic…
Banks seek unified lending rules
Indian banks are developing a common framework for project finance lending to stop regulatory arbitrage and operational misalignment among consortium lenders.
Common parameters under discussion
The framework could cover capital outlay, amount funded, and gestation period to ensure consistent loan classifications across all lenders in a consortium.
RBI leaves decision to banks
The Reserve Bank of India allows individual bank boards to determine whether a loan qualifies as project finance, creating scope for divergent interpretations.
Risk mitigation and audit alignment
A common framework will reduce divergent audit observations and bring better risk mitigation across consortium lenders working on the same project.
“A common framework will also bring in risk mitigation and avoid issues such as divergent audit observations.”
RBI's October 2025 guidelines
RBI rationalized standard asset provisioning to 1% for under-construction projects and 1.25% for commercial real estate, effective October 2025.
Common agreement, flexible terms
RBI mandates all lenders share a common agreement with the debtor, but allows different loan terms for each lender if agreed by all parties.
The takeaway
Banks are aligning project finance standards to prevent regulatory arbitrage and ensure consistent loan classifications across consortium lenders.
