India, May 6 -- The Reserve Bank on Friday proposed tighter rules to govern lending to projects under implementation. The central bank's draft rules include a classification of the projects as per their phase and higher provisioning of up to 5 per cent during the construction phase, even if the asset is standard. It can be noted that in the last credit cycle, project loans were seen to have led to a build-up of stress on bank books. The standard asset provisioning otherwise stands at 0.40 per cent.

Under the proposed norms, first announced in September 2023 and the details revealed on Friday, a bank has to set aside 5 per cent of the exposure during the construction phase, which goes down as the project becomes operational.

Once the proje...