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New rules for project finance has been proposed by RBI

Published on May 10, 2024
Current Context: The Reserve Bank of India (RBI) proposed new rules for project finance in early May 2024. The main goal is to manage risks associated with infrastructure projects that take a long time to complete.
New rules for project finance has been proposed by RBI
  • Here are some key features of the proposed rules:
    • Higher provisioning during construction: Banks would need to set aside more money (up to 5%) as a buffer against potential loan defaults during the construction phase of a project. This is significantly higher than the current requirement.
    • Provisioning linked to project stage: The amount of money set aside would decrease as the project progresses to operational stages.
    • Stricter timelines for NPA classification: Projects facing delays of more than six months from the planned completion date could be classified as non-performing assets (NPAs).


Q.1 What is the main goal of the RBI’s proposed new rules for project finance?
a. To increase the profitability of banks
b. To increase the number of non-performing assets (NPAs)
c. To decrease the number of infrastructure projects
d. To manage risks associated with long-term infrastructure projects
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