The RBI has issued the Reserve Bank of India (Project Finance) Directions, 2025 (‘Project Finance Directions’) dated June 19, 2025, to take effect from October 1, 2025 (‘Effective Date’). The Directions will apply to the ‘project finance exposures’ (‘Exposures’) of commercial banks, NBFCs, primary (urban) cooperative banks and all-India financial institutions (collectively, ‘Lenders’).

Some of the key features of the Project Finance Directions, include the following:

i.    Applicability and Scope:

The Project Finance Directions apply to Exposures, where the predominant source of repayment is from the project’s cash flows and all lenders have entered into a common agreement with the debtor, but exclude projects that have achieved financial closure,^[1] prior to the Effective Date, except where a fresh credit event or material change occurs after the Effective Date.

ii.   Disbursements and Other Conditions:

(a) Lenders are required to ensure that disbursements are proportionate to the stage of completion of the project, which should be certified by the Lenders’ independent engineer or architect.

(b) The Lenders’ credit policies must contain provisions for sanction of Exposures. The fact that financial closure has been achieved and the original date of commencement of commercial operations (‘DCCO’) must be clearly documented prior to disbursement. The disbursement schedules must be aligned with the stage of completion of the project and specified in the loan agreement.

(c) The Project Finance Directions also prescribe certain exposure thresholds for lenders based on the aggregate exposure. Further, the Project Finance Directions require Lenders to ensure the availability of land or right of way, depending on the nature of the project.

iii.  Resolution of Stress and Restructuring:

Lenders are required to monitor the performance of the project and build-up of stress on an ongoing basis and initiate plans for recovery well in advance, as may be required. The occurrence of a ‘credit event’ will trigger a collective resolution process in accordance with the Prudential Framework for Resolution of Stressed Assets issued by the RBI on June 7, 2019.

iv.   Provisioning and Income Recognition:

(a) A project finance account may remain classified as ‘standard’, if it meets the prescribed criteria under the Project Finance Directions. Income recognition for standard assets must be undertaken on an accrual basis, whereas for non-performing assets, the same must be undertaken as per the extant instructions issued by the RBI.

(b) In addition to general provisioning as prescribed in the Project Finance Directions, Lenders are required to maintain additional provisions in case of infrastructure project loans and non-infrastructure project loans, in case of standard accounts which have availed DCCO deferment.

v.    Disclosures and Data Maintenance:

Lenders must maintain project-specific data in the prescribed format on an ongoing basis as part of a project finance database and make detailed disclosures on their project finance exposures and resolution plans.

[1] ‘Date of Financial Closure’ refers to the date on which the capital structure of the project, including equity, debt, grant (if any), accounting for minimum 90% of total project cost, becomes legally binding on all stakeholders.