REC, PFC Shares Rally As RBI Delays Implementation Of Project Finance Norms

Shares of project financing companies rallied on Friday after the new Reserve Bank of India Governor delayed the implementation of new project finance norms to 2026.

Project financing stocks like REC Ltd. and Power Finance Corp. saw nearly 4% gains, as Governor Sanjay Malhotra extended timeframe for the implementation of liquidity coverage ratio norms and the new project finance norms.

The governor said that there will be more time needed to implement project finance norms and will not introduce new project finance norms before March 31, 2026.

NDTV Profit scooped earlier that banks were seeking relaxations on the RBI's draft regulations, that would require setting aside higher provisioning for the financing of infrastructure projects.

In May last year, the central bank proposed that banks be required to increase provisions to 5% of the loan amount disbursed for projects in the construction phase. Until then, this requirement was set at 0.4%.

When the project becomes operational, this can be reduced to 2.5% and then lowered to 1%, once the project reaches net positive cash flow and repays 20% of the dues, the RBI said in the earlier circular.

In its June 2019 circular for restructuring loans, RBI exempted loan accounts under Rs 1,500 crore from the mandatory resolution process after default. However, in a later circular, there was no mention of a cut-off.

Shares of REC rose as much as 4.09% to Rs 451.9 apiece after the announcement. It pared gains to trade 2.6% higher at Rs 445.4 apiece, as of 1:38 p.m. This compares to a 0.09% decline in the NSE Nifty 50.

Power Finance Corp. rose as much as 3.51% to Rs 419.8 per share, while Indian Renewable Energy Development Agency Ltd. rallied as much as 2.08% during the day.