anking stocks HDFC Bank, ICICI Bank, State Bank of India (SBI), Punjab National Bank, among others have slipped as much as 9 percent in the past 3 days after the Reserve Bank of India (RBI) proposed norms to tighten project financing by setting standard asset provisioning of up to 5 percent on loans.

However, reports suggested that the lenders are likely to oppose imposition of higher provisions for under-construction projects. The issue is likely to be discussed within the Indian Banks Association (IBA), which would send its inputs to RBI. The proposed rules can be altered based on feedback received till June 15, 2024.

Analysts at Macquarie said that the project finance heads view RBI's proposed norms to be quite 'onerous' and if implemented, they can dampen recovery in project finance or capex cycle.

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"We believe that banks would significantly scale back project finance credit if these new measures are implemented. In the interim, banks are expected to carry 2.5-5 percent of loan amount as provisioning. Though the RBI rules state that around 1 percent of provisioning can only take place after 20 percent of debt repayment, it usually takes 6-7 years to achieve that 20 percent of debt repayment," said Macquarie analysts.