{"id":4481,"date":"2025-06-20T16:52:03","date_gmt":"2025-06-20T11:22:03","guid":{"rendered":"https:\/\/www.eqwires.com\/tutorials\/?p=4481"},"modified":"2025-06-20T16:52:04","modified_gmt":"2025-06-20T11:22:04","slug":"psu-project-financiers-rally-as-rbi-finalises-softer-project-finance-guidelines","status":"publish","type":"post","link":"https:\/\/www.eqwires.com\/tutorials\/psu-project-financiers-rally-as-rbi-finalises-softer-project-finance-guidelines\/","title":{"rendered":"PSU Project Financiers Rally as RBI Finalises Softer Project Finance Guidelines"},"content":{"rendered":"\n<p id=\"0\">Shares of key state-run project financing companies surged on <strong>Friday, June 20<\/strong>, after the <strong>Reserve Bank of India (RBI)<\/strong> released its much-awaited final guidelines for project finance\u2014a move seen as far more lenient than the earlier draft.<\/p>\n\n\n\n<p><strong>Power Finance Corporation Ltd. (PFC)<\/strong> led the rally with gains of nearly <strong>6%<\/strong>, while <strong>REC Ltd.<\/strong> rose <strong>3.3%<\/strong>. <strong>HUDCO<\/strong> and <strong>IREDA<\/strong> also traded in the green, gaining around <strong>3%<\/strong> and <strong>1.5%<\/strong> respectively. Investors responded positively to the more favourable provisioning norms, which ease the regulatory burden on project financiers.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What\u2019s New in the RBI\u2019s Final Guidelines?<\/h3>\n\n\n\n<p>Under the new framework:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>For <strong>projects under construction<\/strong>, the <strong>Provision Coverage Ratio (PCR)<\/strong> has been set at:\n<ul class=\"wp-block-list\">\n<li><strong>1%<\/strong> of total project cost.<\/li>\n\n\n\n<li><strong>1.25%<\/strong> for under-construction <strong>Commercial Real Estate (CRE)<\/strong> projects.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Once projects enter the <strong>operational phase<\/strong>, provisioning drops to:\n<ul class=\"wp-block-list\">\n<li><strong>1%<\/strong> for CRE,<\/li>\n\n\n\n<li><strong>0.75%<\/strong> for CRE + Residential Housing,<\/li>\n\n\n\n<li><strong>0.4%<\/strong> for other types of project exposures.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The RBI has also introduced a <strong>principle-based approach<\/strong> for resolving stress in project finance exposures.<\/li>\n<\/ul>\n\n\n\n<p>These guidelines will come into effect from <strong>October 1, 2025<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">A Positive Shift from Earlier Proposals<\/h3>\n\n\n\n<p>The final norms are significantly more lenient than the <strong>draft guidelines<\/strong>, which had proposed a steep <strong>5% standard PCR<\/strong> (up from 0.4%) and a 2.5% PCR during the operational phase\u2014scenarios that had sparked investor concern. Analysts had warned that such aggressive provisioning could hit the <strong>CET-1 capital<\/strong> of financiers like REC, PFC, and IREDA by <strong>200\u2013300 basis points<\/strong>.<\/p>\n\n\n\n<p>Under the draft, <strong>NBFCs<\/strong> like REC and PFC were expected to absorb provisions through impairment reserves, potentially eroding regulatory capital without hitting the P&amp;L. For banks, however, all provisioning would hit profits directly\u2014an added burden.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">CLSA: &#8220;The Real Tightening Is in the Disbursement Phase&#8221;<\/h3>\n\n\n\n<p>In a note, brokerage <strong>CLSA<\/strong> highlighted that the RBI has focused its tightening efforts on the <strong>loan disbursement process<\/strong> rather than provisioning. Now, before lenders release funds, all regulatory approvals and infrastructure clearances\u2014such as <strong>right of way<\/strong>, <strong>power evacuation<\/strong>, and <strong>power purchase agreements (PPAs)<\/strong>\u2014must be secured.<\/p>\n\n\n\n<p>CLSA also noted that both <strong>PFC<\/strong> and <strong>REC<\/strong> have recently trimmed growth forecasts due to delays in approvals, indicating that while capital norms are now easier, <strong>execution challenges remain<\/strong>.<\/p>\n\n\n\n<p>Still, the brokerage remains bullish, with a <strong>high-conviction &#8220;outperform&#8221; rating<\/strong> on both stocks, projecting <strong>35% upside for PFC<\/strong> and <strong>37% upside for REC<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Broader Sector Impact<\/h3>\n\n\n\n<p id=\"0\">The revised norms could also spark a reaction in <strong>PSU banks<\/strong> such as <strong>PNB<\/strong>, <strong>Central Bank of India<\/strong>, <strong>Indian Bank<\/strong>, <strong>Bank of Baroda<\/strong>, <strong>SBI<\/strong>, and <strong>Bank of Maharashtra<\/strong>, given their exposure to infrastructure lending.<\/p>\n\n\n\n<p id=\"0\"><strong><a href=\"https:\/\/www.eqwires.com\/tutorials\/who-is-the-best-sebi-registered-investment-advisor-in-i\">Eqwires Research Analyst<\/a><\/strong><\/p>\n\n\n\n<p class=\"has-dark-gray-color has-text-color\"><strong><a href=\"https:\/\/www.eqwires.com\/\">Top-notch SEBI registered research analyst<\/a><\/strong><\/p>\n\n\n\n<p class=\"has-dark-gray-color has-text-color\"><strong><a rel=\"noreferrer noopener\" href=\"https:\/\/www.eqwires.com\/\" target=\"_blank\">Best SEBI registered Intraday tips provider <\/a><\/strong><\/p>\n\n\n\n<p class=\"has-dark-gray-color has-text-color\"><a href=\"mailto:info@eqwires.com\"><strong>info@eqwires.com<\/strong><\/a><\/p>\n\n\n\n<p class=\"has-dark-red-color has-text-color\"><strong><a href=\"https:\/\/t.me\/eqwires\">Telegram&nbsp;<\/a>|&nbsp;<a href=\"https:\/\/www.facebook.com\/eqwires\/\">Facebook&nbsp;<\/a>|&nbsp;<a href=\"https:\/\/instagram.com\/Eqwires\">Instagram<\/a><\/strong><\/p>\n\n\n\n<p class=\"has-dark-red-color has-text-color\"><strong>Call: +91 9624421555 \/&nbsp;<em>+91 9624461555<\/em><\/strong><\/p>\n\n\n\n<p><strong><a href=\"http:\/\/www.eqwires.com\/\">www.eqwires.com<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Shares of key state-run project financing companies surged on Friday, June 20, after the Reserve Bank of India (RBI) released its much-awaited final guidelines for project finance\u2014a move seen as far more lenient than the earlier draft. Power Finance Corporation Ltd. (PFC) led the rally with gains of nearly 6%, while REC Ltd. rose 3.3%. HUDCO and IREDA also traded in the green, gaining around 3% and 1.5% respectively. Investors responded positively to the more &hellip; <a href=\"https:\/\/www.eqwires.com\/tutorials\/psu-project-financiers-rally-as-rbi-finalises-softer-project-finance-guidelines\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;PSU Project Financiers Rally as RBI Finalises Softer Project Finance Guidelines&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":4482,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[74],"tags":[],"class_list":["post-4481","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-best-sebi-registered-advisory-company"],"_links":{"self":[{"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/posts\/4481","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/comments?post=4481"}],"version-history":[{"count":1,"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/posts\/4481\/revisions"}],"predecessor-version":[{"id":4483,"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/posts\/4481\/revisions\/4483"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/media\/4482"}],"wp:attachment":[{"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/media?parent=4481"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/categories?post=4481"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.eqwires.com\/tutorials\/wp-json\/wp\/v2\/tags?post=4481"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}