PFC shares rallied as much as 4.5% to Rs 407.45, while REC rose 3.5% to a day’s high of Rs 396.95.
“In comparison with the May 2024 draft proposal of 5% standard asset provisioning for under-construction projects, the 1.0%/1.25% provisioning for Infra/CRE projects under the final regulations provides a much-needed breather to project financiers, including REC and PFC,” said Avinash Singh, analyst at Emkay Global.
The guidelines, he noted, are positive for project finance lenders and remove the overhang caused by the May 2024 draft directions.
“For power sector NBFCs (REC and PFC), even a minor impact of these directions, in the context of additional standard asset provisioning, will be absorbed through impairment reserves and exert no pressure on PAT or net worth. However, regulatory capital will see some impact—though minimal and likely only from FY27—as the guidelines apply only to loans achieving financial closure on or after October 1, 2025,” Singh added.
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While the 2024 draft norms had proposed stringent provisioning (up to 5%) and stricter upgrade criteria (360-day performance requirement), the final guidelines have significantly relaxed these provisions, resulting in minimal impact on banks’ profitability and balance sheets.Motilal Oswal also stated that the revised norms will have a negligible impact on bank and NBFC profitability, as the existing loan book remains unaffected.”The RBI’s final project finance guidelines are a positive for banks and NBFCs, especially compared to the stricter 2024 draft. The most notable relief comes from significantly eased provisioning requirements—reduced to just 1% during construction (versus 5% proposed earlier) and as low as 0.4% post-DCCO. This reduces capital drag while maintaining prudence. Overall, the final norms strike a balanced approach, enabling continued flow of project finance with minimal impact on lenders’ profitability or balance sheet strength,” the brokerage said.
