Top Bankers Speak: The Real Impact Of RBI's New Infra Finance Rules On Lending

State Bank of India (SBI) will be able to absorb the additional provision requirement if the Reserve Bank of India (RBI) implements the new norms on project finance as proposed, although the pricing of loans may have to be revisited, Chairman Dinesh Kumar Khara said. Atul Kumar Goel, CEO and MD of Punjab National Bank, said that it would be better to wait for the final guidelines from the Reserve Bank of India (RBI) while speaking about the proposed higher provisioning for infrastructure financing. PNB's CEO said that it is too early to consider the impact on the balance sheet from significant exposure of banks in this space. Last week, in the draft norms on projects under implementation, the regulator proposed a standard asset provision requirement of 5 per cent during the under-construction period in a phased manner. Higher provision means banks have to set aside additional capital. The RBI draft guidelines on project financing were issued earlier this month. The proposed stricter lending criteria, with additional provisioning, are aimed at preventing accounting shocks. The new draft guidelines released by RBI provide a framework for financing projects in infrastructure, non-infrastructure, and commercial real estate sectors by banks, non-banks, and cooperative banks. Banks faced an NPA crisis between 2009 and 2012 due to excessive lending to infrastructure firms, prompting the Reserve Bank of India to frame guidelines on resolving stressed assets. Watch insights from bank leaders on the impact of RBI’s infra finance guidelines. Debadatta Chand, MD & CEO of Bank of Baroda, says "Minimal impact on credit costs" and "Additional provision easily manageable." K Satyanarayana Raju, MD & CEO of Canara Bank, says "No threats to the bank's margins" and "No impact on credit growth." AK Srivastava, MD & CEO of Indian Overseas Bank, says "Minimal impact on the balance sheet" and "Cost of lending will increase."