India tightens rules on project lending amid big defaults ...Middle East

India’s central bank, the Reserve Bank of India (RBI), has said it will require lenders to keep money in reserve equal to 1% of the value of loans given to infrastructure projects in order to cover losses.

It comes as the country is seeing big loan defaults caused by project delays and over-optimistic revenue projections, Reuters reports.

Under new rules taking effect on 1 October, lenders will also have to set aside 1.25% of the value of loans for commercial real estate projects.

Last May, the bank proposed a 5% reserve on infrastructure loans but lenders appealed, saying the move would delay a recovery in project finance.

The rules also limit the project deadline extensions lenders can approve to three years for infrastructure projects and two years for other projects.

Reuters notes that RBI governor Sanjay Malhotra has been balancing financial risk management with stimulating growth.

This year the RBI partially reversed tighter rules for bank loans to small borrowers and non-bank lenders, among other easing measures.

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Further Reading:

New Gorakhpur Expressway continues India’s road modernisation Modi hails fast metro build-out in Uttar Pradesh’s second city

India tightens rules on project lending amid big defaults Global Construction Review.

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