MUMBAI: The final guidelines for project loans, which seek to mandate lenders to make higher provisions, are expected to be announced in the next two to three months, and so are the expected credit loss-based provisioning norms, according to a senior Reserve Bank official.
The central bank has proposed to make banks set aside five per cent of their total exposure to a project till the construction of the project is on. Fearing a hit on profit, banks have been asking for a relook into it.
The official also said the new norms regarding the expected credit loss (ECL)-based provisioning are also in an advanced stage of discussion. Both regulations seek to tighten the lending norms so that better assets are created and thus will hit the bottom line of lenders.
So far the regulator has received around 60 responses on the project loans draft, and the central bank is going through all the suggestions, chief general manager Vaibhav Chaturvedi told reporters on the sidelines of the ongoing global fintech summit here Thursday.
Asked about the timelines by when the project loan final guidelines will come in, he said it will take "at least two to three months" parrying a specific answer on whether the guidelines will be implemented from April 1 next year onwards.
On the ECL framework, Chaturvedi said the norms are in the "advance stages" of discussion and admitted that there is an "overlap" on both the ECL and project finance norms, but did not comment on whether both the guidelines will come in together.
Meanwhile, on reports of higher delinquencies in microloans, he said there is no systemic risk and entry-specific concerns are discussed bilaterally as part of the supervisory framework. If some regulatory interventions are required, they are also initiated, he said, citing the November 2023 regulations hiking risk weights on unsecured lending.
There is "nothing on the table" right now on the MFI sector, the official said, adding if any action is taken, it will be for the entire sector and not entity-specific.
Addressing the summit, Chaturvedi asked financiers to be more responsible while engaging in their core lending activities and the industry to take steps towards this aim. The offerings need to be transparent and the regulated entities' dealings need to be fair, he underlined.