Indian Economy News

Moody's expects infra credit revival as Reserve Bank of India (RBI) eases provisioning norms

The Reserve Bank of India (RBI) has finalised guidelines that significantly reduce provisioning requirements for under-construction infrastructure projects, a move expected to boost credit growth in the sector, according to Moody’s Ratings. Effective October 1, 2025, lenders will be required to provision only 1% of the loan amount during the construction phase, a sharp reduction from the 5% proposed in the 2023 draft. For commercial real estate (CRE), the requirement is 1.25%, and for CRE-Residential Housing (RH), it is 1%.
Moody’s noted that the finalisation of these norms will reduce uncertainty and reignite the funding appetite for infrastructure projects, which had seen subdued credit activity in recent quarters. Between April 2024 and April 2025, credit to the infrastructure sector contracted 0.8%, following the RBI’s earlier proposal to tighten norms. Infrastructure-focused non-banking financial companies (NBFCs) also experienced slower growth, with loan disbursements rising at an annualised rate of 6.9% between March and September 2024, compared to 13.2% for the broader NBFC segment. Once a project becomes operational, provisioning norms ease further to 0.4% for most projects, 0.75% for CRE–RH, and 1% for CRE. Additional provisions under the new guidelines include minimum lender exposure, proof of land acquisition before fund release, and capped deadline extensions, three years for infrastructure and two years for other projects. While the revised norms may slightly affect the profitability of state-owned banks and NBFCs with pre-October 2025 exposures, Moody’s expects the impact to be marginal and one-time in nature.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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