Centre reviews draft RBI rules for higher provisioning in infra projects, lenders may oppose

Reserve Bank of India

The government is evaluating the Reserve Bank of India draft rules which  call for higher provisioning in infrastructure projects but lenders are likely to oppose them on multiple forums, The Economic Times reported.

After the evaluation, the draft rules will be discussed with the banking regulator during consultations, it added.

Officials said that this could lead to a rise in interest rates and derail the capital expenditure momentum.

Moneycontrol couldn't independently verify the report.

A finance ministry official, as per the report, said these were draft guidelines, and the consultation process was underway. "All stakeholders will try to find a common ground to manage risks while supporting infrastructure financing," he added. He said if banks and other ministries flag concerns, those will be shared with the RBI.

The regulator has sought comments on its proposed guidelines by June 15, the report said.

According to the RBI draft norms, when a project is in the construction phase, the lenders would have to set aside a provision of 5 percent of the loan amount. This will reduce to 2.5 percent once the project goes on stream and will be down to 1 percent when the project receives adequate cash flow to repay its obligations.

India sees a boom in infrastructure and manufacturing projects, led by the government's drive to boost the economy.

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