PFC, REC, PSU Banks To Benefit From RBI's Project Finance Push, Say Analysts
The Reserve Bank of India has taken a major step to ease pressure on lenders by softening its final guidelines for project finance loans on Thursday. This move, according to multiple brokerages, could boost sentiment and lending activity in the infrastructure space, benefitting players like REC, Power Finance Corp., and large public sector banks.
The RBI's final rules on project finance provisioning have been received positively across the board. By easing capital requirements and addressing long-standing concerns over project delays and overruns, the move is seen as a key enabler for increased project lending.
What Has Changed?
The RBI has reduced the standard asset provisioning requirement for loans to under-construction projects from the earlier proposed 5% to just 1%. For commercial real estate projects, provisioning has been set at 1.25%. These norms will be effective from Oct. 1, 2025.
This means that banks and non-banking financial companies financing infrastructure and real estate projects will need to set aside far less capital upfront, freeing up room for more lending and easing profitability pressures.
What Brokerages Are Saying
Jefferies
The RBI's move is significantly more lenient than the draft version and is positive for infrastructure-focused lenders.
For banks, the new norms translate into 25–60 basis points higher provisioning on under-construction projects compared to current levels.
However, lenders like REC and PFC, which already have provisioning levels close to the new norms, are well-positioned.
Emkay
Emkay calls the RBI's final norms “pragmatic”, as they reduce provisioning requirements while allowing flexibility for project delays and cost overruns.
The firm sees minimal impact on profit or capital till financial year 2027, when the rules kick in.
Combined with rate cuts and ample liquidity, these relaxed norms could trigger a revival in project lending.
Large PSU banks, REC, and PFC are expected to benefit the most.
CLSA
While calling the reduced provisioning a relief, CLSA points out that the RBI has tightened disbursement norms, though many lenders already follow such practices.
CLSA also notes that REC and PFC have recently lowered their growth guidance due to delays in transmission infrastructure and power purchase agreements.
Any resolution of these ecosystem challenges could serve as the next big catalyst for these stocks.
Bernstein
Bernstein hails the 1% provisioning as a "major relief" for lenders.
The firm believes that relaxed norms, combined with liquidity and rate cuts, create the perfect setup for a lending revival.
Specialised NBFCs like PFC and REC, along with PSU banks, are seen as top gainers due to reduced capital pressure.
Citi
Citi calls the final rules “lender-friendly,” and emphasises the boost they provide to both infrastructure and CRE financing.
The easing of cost overrun concerns, and improved regulatory clarity should support sustained lender interest.
PSU banks and infra-focused NBFCs are best positioned to benefit.
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