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Business Standard
13 hours ago
- Business
- Business Standard
PFC, REC gain as RBI unveils final project finance norms
Shares of Power Finance Corporation (PFC) and REC rose by 3.33% to 5.37% after the Reserve Bank of India (RBI) issued its final Project Finance Directions, 2025. The comprehensive framework, aimed at streamlining and standardizing project loan regulations across banks, NBFCs, and cooperative lenders, comes into effect from 1 October 2025. The market responded swiftly to the announcement, with shares of key project financiers surging in morning trade. PFC jumped 5.37%, while REC climbed 3.33%, as investors welcomed the regulatory clarity and operational flexibility promised by the new guidelines. Compared to the RBIs draft proposal from May 2024, which had outlined a steeper 5% standard asset provisioning for under-construction projects, the final guidelines dial things down substantially. Now, lenders will need to set aside just 1% for infrastructure projects and 1.25% for commercial real estate (CRE). Thats a major breather for dedicated project financiers like REC and PFC, who had been staring at potentially higher capital requirements under the earlier draft. The RBI has rationalized the norms around the extension of the 'Date of Commencement of Commercial Operations' (DCCO), allowing extensions of up to three years for infrastructure projects and two years for non-infrastructure ones. Lenders will also have greater flexibility to assess and decide on DCCO extensions within these ceilings based on commercial viability. The provisioning requirements for under-construction projects have been streamlined as well. Lenders will now set aside a standard 1% for such exposures, with a gradual increase depending on the length of DCCO deferment. In the case of under-construction commercial real estate, the initial provisioning will be slightly higher at 1.25%. For projects that have already achieved financial closure, existing provisioning rules will continue to apply, ensuring a smooth transition to the new regime. Once projects become operational, the provisioning rates are clearly defined: 1% for commercial real estate, 0.75% for CRE-residential housing, and 0.40% for other project loans. This structured approach is expected to bring predictability to provisioning and risk management practices. The market view is clear: the final norms are far more balanced and pragmatic. They reduce capital drag without compromising prudential standards. The relaxed provisioning norms, coupled with the exclusion of existing loan books from the new rules, would have negligible impact on NBFC and bank profitability. For power sector financiers like PFC and REC, the relief is doubly reassuring. Even the marginal provisioning required under the new norms will be comfortably absorbed through existing impairment reserves. Importantly, the directions only apply to loans achieving financial closure on or after 1 October 2025, meaning current portfolios are unaffected. While the earlier draft had also proposed a stringent 360-day performance requirement for loan upgrades -- another red flag for lenders, this too has been relaxed in the final version. The overall tone of the guidelines has shifted from caution-heavy to growth-accommodating, signalling the RBI's intent to support long-term infrastructure finance without straining lender balance sheets.
Business Upturn
18 hours ago
- Business
- Business Upturn
REC shares rise over 2% as RBI finalises favourable project finance norms; CLSA sees 37% upside
By Aditya Bhagchandani Published on June 20, 2025, 09:30 IST Shares of REC Limited climbed 2.25% to ₹392.30 on Friday, June 20, after the Reserve Bank of India released its final guidelines on project financing—offering significant relief to financiers. The final rules are seen as much softer than the earlier draft and have eased concerns over regulatory capital erosion for non-banking financial companies (NBFCs) like REC and PFC. As per the new RBI norms, the Provision Coverage Ratio (PCR) for projects under construction has been set at 1% of the total project cost, while for under-construction Commercial Real Estate (CRE) exposures, it will be 1.25%. In the operational phase, provisions will ease further—0.4% for regular project exposures, 0.75% for CRE and residential housing, and 1% for operational CRE assets. CLSA noted that unlike the earlier draft—which suggested standard PCRs of up to 5%—the final guidelines are far more accommodating. Analysts had feared a 200–300 basis point impact on CET-1 ratios for companies like REC, but the final norms significantly reduce that pressure. CLSA, which has a high-conviction 'Outperform' rating on REC, projects a 37% upside. The brokerage noted that the Ministry of Power is actively working to ease right-of-way and clearance challenges in the power infrastructure space—key hurdles that REC and PFC had cited in their lowered FY25 growth guidance. The new norms, effective October 1, also shift focus to better project appraisal. Disbursements will now only be permitted after securing all regulatory approvals and land access, as per CLSA. REC's market cap now stands at ₹1.03 lakh crore, and the rally is seen as a positive response to RBI's calibrated and sector-sensitive regulatory approach. Ahmedabad Plane Crash Aditya Bhagchandani serves as the Senior Editor and Writer at Business Upturn, where he leads coverage across the Business, Finance, Corporate, and Stock Market segments. With a keen eye for detail and a commitment to journalistic integrity, he not only contributes insightful articles but also oversees editorial direction for the reporting team.
Mint
18 hours ago
- Business
- Mint
Stocks in uptrend: REC, PFC, IREDA up on RBI project finance norm. Do you own any of these?
Stocks in uptrend: REC, PFC, IREDA share prices gained up to 5% in the morning trades on Friday. The gains were led by news flow around RBI finalizing the project finance norm. Do you own any of these? Power Finance Corporation Ltd was the largest gainer as its share price gained more than 5%. The REC Ltd and Indian Renewable Energy Development Agency Ltd or IREDA share price also were up 3-4% in the morning trades on the BSE on Friday
Time of India
18 hours ago
- Business
- Time of India
PFC, REC shares rally 4% as RBI eases provisioning norms for project financiers
Shares of project financiers PFC and REC jumped up to 4.5% on Friday after the RBI issued its final directions on project financing, replacing multiple legacy circulars and aligning norms across banks, NBFCs, and co-operative banks. PFC shares rallied as much as 4.5% to Rs 407.45, while REC rose 3.5% to a day's high of Rs 396.95. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo "In comparison with the May 2024 draft proposal of 5% standard asset provisioning for under-construction projects, the 1.0%/1.25% provisioning for Infra/CRE projects under the final regulations provides a much-needed breather to project financiers, including REC and PFC," said Avinash Singh, analyst at Emkay Global . The guidelines, he noted, are positive for project finance lenders and remove the overhang caused by the May 2024 draft directions. "For power sector NBFCs (REC and PFC), even a minor impact of these directions, in the context of additional standard asset provisioning, will be absorbed through impairment reserves and exert no pressure on PAT or net worth. However, regulatory capital will see some impact—though minimal and likely only from FY27—as the guidelines apply only to loans achieving financial closure on or after October 1, 2025," Singh added. Live Events While the 2024 draft norms had proposed stringent provisioning (up to 5%) and stricter upgrade criteria (360-day performance requirement), the final guidelines have significantly relaxed these provisions, resulting in minimal impact on banks' profitability and balance sheets. Motilal Oswal also stated that the revised norms will have a negligible impact on bank and NBFC profitability, as the existing loan book remains unaffected. "The RBI's final project finance guidelines are a positive for banks and NBFCs, especially compared to the stricter 2024 draft. The most notable relief comes from significantly eased provisioning requirements—reduced to just 1% during construction (versus 5% proposed earlier) and as low as 0.4% post-DCCO. This reduces capital drag while maintaining prudence. Overall, the final norms strike a balanced approach, enabling continued flow of project finance with minimal impact on lenders' profitability or balance sheet strength," the brokerage said.
Business Standard
3 days ago
- Business
- Business Standard
REC intimates on Subsidiary incorporation
REC has announced that Rajgarh Neemuch Power Transmission Limited has been incorporated as Wholly Owned Subsidiary of REC Power Development and Consultancy Limited (HRECPDCL"- a Wholly Owned Subsidiary of REC Limited). The said company is also subsidiary company of REC Limited, in terms of the provisions of Section 2(87) of the Companies Act, 20l3 .Powered by Capital Market - Live News
