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The Morning Brief

Why Are Banks Worried About RBI’s New Project Finance Rules?

May 23, 2024
The podcast discusses RBI's new project finance rules impacting infrastructure funding. Banks worry about increased provisions affecting profitability. An in-depth analysis with experts on the benefits or hindrances of these norms for the sector.
23:58

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Quick takeaways

  • RBI's new project finance rules aim to increase accountability and viability of infrastructure projects through higher provisions for loans.
  • Debate surrounds the impact of higher provisions on banks' profitability and capital costs, raising concerns about potential effects on project financing.

Deep dives

RBI's Proposal for Project Financing Guidelines

The Reserve Bank of India (RBI) has introduced new comprehensive guidelines for project financing in the country. These guidelines aim to change the way infrastructure and real estate projects are funded through debt by increasing loan provisions to a uniform rate of 5% for various project types. The RBI's rationale behind these rules is to ensure higher accountability and project viability, as evidenced by many delayed and over-budget projects evaluated in a recent comprehensive check by the Ministry of Statistics and Program Implementation.

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