Shares of the state-owned banks and project financers plunged on Monday, days after the Reserve Bank of India (RBI) proposed to tighten the project financing norms, which require lenders to set aside higher capital for doling out loans to under-construction projects. Shares of Power Finance Corporation (PFC) and REC fell the most at 9 per cent and 7.5 per cent, respectively. The Nifty PSU Bank index slumped 3.7 per cent with Punjab National Bank (PNB) leading the fall at 6.4 per cent. Canara Bank and Bank of Baroda were other major losers. Top lender State Bank of India (SBI) fell nearly 3 per cent. The RBI on Friday released a draft circular on project financing in a bid to strengthen balance sheets. Under the proposed norms, lenders will have to make provisions of up to 5 per cent of the outstanding exposures under construction projects. This would reduce to 2.5 per cent once the asset was operational. It would decline further to 1 per cent when 20 percent of the loans are repaid and the project has the adequate cash flow to repay current obligations. The circular covers not just project financing but also commercial real estate financing for all lenders. More importantly, the guidelines are to be applicable immediately and will include the current outstanding exposure. (ICE NEW DELHI)

Fonte notizia: Business Standard