Finance

What RBI proposal for tighter project finance rules will mean for REC, PFC?

Published

2 years ago

May 6, 2024

What RBI proposal for tighter project finance rules will mean for REC, PFC?

Anil Gupta, Sr VP & Co-Group Head-Financial Sector Ratings, ICRA, in conversation with ET Now on RBI proposal for tighter project finance rules. Gupta says “given the market reaction, there could be a case where maybe more clarification will emerge as to whether 5% provision requirement is on the entire under-construction portfolio of the lenders or not. Our reading is that it is only for the cases where the project is under construction and has sought a DCCO extension. If that clarification comes, it should not be really negative for the sector because it is only a positive from the balance sheet perspective of the lenders that you are taking care of the risk which has gone up because of DCCO extension. It should not be negative for the credit flow.

Seeing the implication of the RBI proposal for tighter project finance rules play out on the likes of an REC and PFC, gives us a sense of the negative implication for such
Anil Gupta: Basically, the regulation which has come out is harmonising the guidelines which were there for banks and NBFCs earlier. For example, today if a project defers its DCCO and that deferment is within a period of two years, the standard asset provisioning norm for a bank is 0.4% and for an NBFC it is 0.25%. Now what this circular is saying is that even if there is a deferment of DCCO within a period of two years, because there have been some deterioration in the project fundamentals, the standard asset provisioning should increase to 5%. So, this 5% provisioning requirement, which is specified with this circular, in our view is applicable only for the projects which are taking a DCCO extension and not for all the projects which are under construction. Now, if this deferment is beyond the two-year period, let us say for an infra project, the earlier guidelines required a provisioning to increase to 5%. The new guidelines which they are proposing says that if the deferment is beyond two years, then additional 2.5% over and above the 5%, which it is currently specifying, will kick in.

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So, total provisioning requirement for cases or projects which are deferring DCCO by more than two years, will be 7.5%. While this is good from the strengthening of the balance sheets for the banks, because any project, let us say, which is undergoing a DCCO extension has undergone a change in the risk. So, the increased provisioning requirement, even if the DCCO extension is up to two years, is a positive thing and that is a good thing. Another positive which we are seeing in the circular is that as per our understanding, the 5% provisioning which was there in the earlier guidelines for the projects who have taken a DCCO extension beyond two years, now the current guidelines allow that reduction in the provisioning from 5% to 2.5% and to 1% if the project commences the COD and also repays the debt to the extent of 20%. So, that way, it will be positive if the project is able to demonstrate the repayment to the extent of 20% of the debt at the time of DCCO extension, then the lenders will be able to release the provision also from 5% to 1%. So that way, we believe that it is positive for the bank’s riskiness; if there is a DCCO extension, then you increase the provision that will also force the lenders as well as the borrowers to possibly fix up a DCCO which is more realistic and you do not take a leeway in terms of a DCCO extension which is available let us say up to two years without additional provision.

So, you will fix up a more realistic DCCOs, more mindful in terms of setting out a repayment schedule which will align with your cash flows so that you do not have to avail a DCCO extension even though the project is complete but is not generating good enough revenues to service the debt. Overall, it is a good thing from the balance sheet strengthening as well as provision release once the project is operational and repays the debt.

PFC and REC are well capitalised. Do you sense that it may not lead to any damage on their profits and losses because their balance sheet is well capitalised?
Anil Gupta: I will not comment on the stock specific things but in general, it is applicable only for the projects which are availing DCCO extension. So, one, that the DCCO portfolio for the banks will not be very high or the lenders will not be very high; we are not talking about entire under construction portfolio of the lenders, we are talking only on the portfolio which would have availed DCCO extension and we should be mindful of that in the last few years if we leave aside maybe the thermal power or the roads which have been a long gestation projects and are more prone to DCCO extension, the recent expansions have largely been in the renewable energy space or let us say projects which are less prone to maybe DCCO extension.

But lenders and the borrowers have to be mindful of setting up DCCO because in the current set of rules being proposed, DCCO deferment will kick in a higher provisioning requirement.Down the line, could this regulation lead to lower loan growth?
Anil Gupta: No. First given the market reaction, there could be a case where maybe more clarification can emerge as to whether 5% provision requirement is on the entire under-construction portfolio of the lenders because our reading is that it is only for the cases where the project is under construction and has sought a DCCO extension.

So, if that clarification comes, it should not be really negative for the sector because it is only a positive from the balance sheet perspective of the lenders that you are taking care of the risk which has gone up because of DCCO extension. So, per se, if that clarification comes, it should not be any negative for the credit flow for the sector.

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Finance

New Funding Models Needed As Global Health Faces Growing Financial Strain – Health Policy Watch

Published

5 hours ago

March 28, 2026

Press Room

New Funding Models Needed As Global Health Faces Growing Financial Strain – Health Policy Watch

Christoph Benn (left) and Patrick Silborn

Global health is facing a funding crisis. Aid is shrinking, debt is rising, and the needs are only increasing. According to Christoph Benn of the Joep Lange Institute and Patrik Silborn of UNICEF Afghanistan, health systems will need to fundamentally rethink how they finance and sustain care.

On a recent episode of the Global Health Matters podcast, host Gary Aslanyan was joined by these two experts, who said “innovative finance” has become central to discussions on sustaining health systems.

Benn said that while the term is widely used, few agree on what it actually means. He described it as a “spectrum” of approaches, ranging from philanthropic grants and conditional funding to private-sector investment models that expect financial returns.

“It has frustrated us deeply that so many people are talking about innovative finance, but very few actually know what they’re talking about,” Benn said.

Silborn emphasised that these mechanisms should not be treated as one-size-fits-all solutions. Instead, financing models must be designed around specific problems whether that means raising new funds, improving efficiency, or linking payments to measurable outcomes.

Drawing on his experience in Rwanda, Silborn described how a results-based funding model tied disbursements directly to performance, helping the country to maintain progress against major diseases despite reduced funding.

Both experts stressed that private-sector engagement requires a clear understanding of incentives.

“Private corporations are not charities,” Benn said. They can, however, contribute through marketing partnerships, technical expertise, or investment models that align financial returns with social outcomes.
Looking ahead, Benn pointed to targeted taxes and debt swaps as among the most scalable tools. Still, both warned that innovative finance is not a substitute for public responsibility.

“It only works when it is designed to solve real problems in specific contexts,” Benn said, underscoring that strong systems and governance remain essential to any lasting solution.

Listen to the full episode >>

Read more about Global Health Matters podcasts on Health Policy Watch >>

Image Credits: Global Health Matters podcast.

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Finance

Coalition urges lawmakers to advance South Carolina Financial Freedom Act

Published

17 hours ago

March 27, 2026

Press Room

Coalition urges lawmakers to advance South Carolina Financial Freedom Act

COLUMBIA, S.C. (WCIV) — Dozens of local elected officials from across South Carolina are urging state lawmakers to pass legislation that would allow cities, counties and school districts to deposit taxpayer funds in the financial institution of their choice, including qualified credit unions.

The Palmetto Public Deposits Coalition, formed by more than 40 mayors, county council members and municipal leaders have signed a joint letter calling on the General Assembly to advance the South Carolina Financial Freedom Act, a bill that, if signed, would lift long-standing restrictions that require public entities to deposit funds exclusively in commercial banks, even though state law already allows credit unions to accept public deposits.

The coalition argues the current system limits competition and prevents local governments from seeking potentially better rates, lower fees and more responsive service.

READ MORE | Lowcountry residents feel squeeze as inflation rises 25% over five years

“Local governments should have the same financial freedom that families and businesses have — the ability to choose the financial institution that best meets their needs,” Rick Osborn, chairman of the Palmetto Public Deposits Coalition, explained. “This commonsense reform will introduce healthy competition, help stretch taxpayer dollars further, and strengthen partnerships with community-focused financial institutions that are deeply invested in South Carolina.”

The efforts also won support from the South Carolina Association of Counties and the Municipal Association of South Carolina, whose boards have formally endorsed expanding deposit options. Their backing signals broad agreement among local government officials that the law should be modernized.

In their letter to lawmakers, the coalition argued that permitting credit unions to hold public deposits would restore financial choice and improve outcomes for residents.

“This legislation is about giving local leaders more tools to serve residents effectively and make responsible financial decisions,” said Goose Creek Mayor Greg Habib, one of the signatories.

READ MORE | Treasury to hold conferences on AI regulation reductions for banks

The Financial Freedom Act would allow, but not require, public entities to deposit funds in qualified credit unions. Coalition members said the bill is not designed to favor one type of institution over another, but to encourage competition in a market currently limited to commercial banks, many of which operate outside the state.

The Palmetto Public Deposits Coalition said it will continue working with local leaders, state associations and lawmakers as the legislation moves through the current session.

Finance

FTSE 100 LIVE: Stocks muted as Trump delays strikes on Iran power plants

Published

1 day ago

March 27, 2026

Press Room

FTSE 100 LIVE: Stocks muted as Trump delays strikes on Iran power plants

The FTSE 100 (^FTSE) was hovering around the flatline on Friday, while European stocks headed lower, as traders shrugged off Donald Trump’s latest pause on striking Iran’s energy infrastructure.

On Thursday night, the US president extended the deadline for Iran to open the strait of Hormuz by 10 days, meaning the new date would be 6 April. He claimed that talks were “going very well”. However, Iran denied it was “begging to make a deal”, despite Trump’s earlier claims.

It comes after Wall Street posted its biggest daily loss since the Iran war began on Thursday.

The Wall Street Journal also reported on Thursday that the US was considering sending as many as 10,000 additional troops to the Middle East.

Tony Sycamore, market analyst at IG, said Trump has extended the uncertainty gripping markets.

“While the rhetoric around de-escalation and dialogue is certainly preferable to outright conflict, the market appears to be growing increasingly numb to President Trump’s verbal reassurances. By extending the deadline, it effectively kicks the can down the road, pushing back any concrete resolution regarding the reopening of the Strait of Hormuz. This, in turn, simply extends the uncertainty weighing on markets and the broader global economy.”

Elsewhere, UK retail sales dipped by 0.4% in February, following a rise of 2.0% in January, the Office for National Statistics revealed. In the December to February quarter, sales volumes were up 0.7% compared with the previous three months.

London’s benchmark index (^FTSE) was hovering around the flatline in early trade
Germany’s DAX (^GDAXI) dipped 0.5% and the CAC (^FCHI) in Paris headed 0.2% into the red
The pan-European STOXX 600 (^STOXX) was down 0.3%
Wall Street is set for a muted start as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all lacklustre.
The pound was 0.1% down against the US dollar (GBPUSD=X) at 1.3311

Follow along for live updates throughout the day:

LIVE 4 updates

Consumer confidence in Britain slips in March

GfK revealed on Friday that the UK confidence index fell two points to -21 in March – the weakest level since Donald Trump announced sweeping import tariffs in April last year. At the time, the index sank to -23.
Neil Bellamy, the firm’s consumer insights director, said the survey showed people are concerned about the prospects for inflation and the economy.
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The group said the sharp rise in energy prices caused by the effective closure of the strait of Hormuz and attacks on infrastructure in the region “has led to fears of higher inflation and weaker growth across oil-importing countries”.
A majority of respondents said the economy had improved modestly over the last year, but was about to decline significantly. They said they were likely to save more and spend less on big ticket items over the next 12 months as a result.
UK retail sales dip amid wet weather and weaker supermarket trading

UK retail sales decreased in February as supermarket sales slipped and demand for household goods was impacted by wet weather, according to official figures.
The Office for National Statistics (ONS) said the total volume of retail sales, which measures the quantity bought, fell by 0.4% last month.
It compared with a 2% rise in January, which was revised up from a previous estimate of 1.8%.
The monthly decline in February was nevertheless shallower than expected, with analysts having predicted a drop of 0.7% for the month.
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A fall in supermarket sales partly contributed to the fresh monthly decline, falling by 0.6%.
All food stores, which includes convenience stores and specialist retailers, reported a 0.7% decline in sales volumes, marking the weakest level since August last year.
Elsewhere, the data showed that household goods stores saw weaker demand, dropping by 2.6%, with retailers partly blaming “wet weather” for reduced demand.
Met Office data indicated that the UK, had above average rainfall in February 2026, more so than in either January this year or the previous February.
Non-store retailers also reported a slight dip over the month, with retailers suggesting that consumers brought forward spending to January to make the most of post-Christmas discounts.
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Matt Dalton, consumer sector leader at Forvis Mazars, said:
Asia and US overnight

Stocks in Asia were mixed overnight, stuck in a wait and see mode, with the Nikkei (^N225) fell 0.4% on the day in Japan, while the Hang Seng (^HSI) rose 0.4% in Hong Kong.
The Shanghai Composite (000001.SS) was 0.6% up by the end of the session and in South Korea, the Kospi (^KS11) lost 0.4% on the day. Part of the Kospi’s weakness was also due to the ongoing sell-off in South Korean chipmaker stocks from Google’s memory chip announcement.
Across the pond, the S&P 500 (^GSPC) slipped 1.7%, and the tech-heavy Nasdaq (^IXIC) was 2.4% down, both seeing their biggest declines since the start of the war and fell back to their lowest levels since September. The Dow Jones (^DJI) ended 1% lower, while the VIX index rose 2.11 points to 27.44pts, its highest since 6 March.
Part of the Wall Street selloff was also driven by the ongoing rout from Tuesday’s announcement that Google had found a new algorithm that could reduce the memory chip amount needed in AI models.
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Coming up

Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what’s moving markets and what’s happening across the global economy.
To the day ahead we’ll get the US March Kansas City Fed services activity, UK February retail sales. Central bank events include the ECB consumer expectations survey, and the Fed’s Daly and Paulson will speak.
Here’s a snapshot of what’s on the agenda today:

7am: UK retail sales for February

9am: ECB Consumer Inflation Expectations survey

2pm: University of Michigan consumer confidence report