Cashvisory said the Reserve Bank of India’s move to lower provisioning norms for infrastructure and real estate loans supports long-term credit growth, while warning it could raise asset quality risks if banks fund riskier projects.
The Reserve Bank of India (RBI) has eased regulations for project financing on Friday.
RBI’s decision to reduce provisioning norms for new infrastructure and real estate loans from the initially proposed 5% to just 1–1.25% may enhance credit flow and bank lending flexibility, according to SEBI-registered investment advisor Cashvisory.
The new project finance guidelines come into effect on October 1, 2025.
According to Cashvisory, the change allows banks to lend more aggressively without locking up large amounts of capital, smoothing funding access for infrastructure and real estate projects.
While the near-term impact on bank profitability is seen as limited, the advisor expects stronger credit growth in the long run.
However, Cashvisory cautioned that relaxed norms could lead to higher asset quality risks if banks decide to finance riskier and delayed projects, thereby increasing NPAs.
Cashvisory said that infrastructure developers like Larsen & Toubro and lenders like State Bank of India, Bank of Baroda and infrastructure focused private players like ICICI Bank will gradually benefit from enhanced credit availability.
“The RBI’s push for liquidity in the economy continues,” the firm wrote.
ICICI Bank shares were up 11.5% year-to-date, while State Bank of India gained 0.3%. In contrast, Larsen & Toubro and Bank of Baroda declined 0.1% and 3.1%, respectively.
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