New Delhi, September 21, 2026: Indian banks are working towards greater uniformity in the way project-finance loans are identified, structured and monitored, as lenders seek to reduce differences in practices among banks participating in the same large project.

The proposed industry-level alignment is expected to bring state-owned and private-sector banks onto a more consistent framework, particularly for large infrastructure and industrial projects. People familiar with the discussions told The Economic Times that banks are examining common parameters such as a project's overall capital requirement, the amount financed through debt and the expected gestation period.

The move comes against the backdrop of the Reserve Bank of India's revised project-finance framework, which came into force on October 1, 2025. The RBI's framework was designed to harmonise project-finance regulations across different categories of regulated lenders while allowing individual bank boards to determine their own internal parameters for classifying and underwriting such loans.

Why banks want greater consistency

Project finance differs from conventional corporate lending because repayment is primarily expected to come from the cash flows generated by the project itself. This makes the classification and monitoring of such loans particularly important when several lenders participate in a consortium.

At present, banks may apply somewhat different internal criteria when deciding whether a particular loan qualifies as project finance. This can create situations where the same exposure receives different classifications among consortium members.

Bank executives cited by The Economic Times said a common framework could reduce such inconsistencies, strengthen risk management and limit the scope for regulatory arbitrage. It could also reduce the possibility of different audit observations arising from different interpretations of the same project.

RBI framework already sets common regulatory guardrails

The RBI's Project Finance Directions, 2025 apply to commercial banks, NBFCs, housing finance companies, primary urban cooperative banks and All-India Financial Institutions covered by the rules. The framework includes both infrastructure and non-infrastructure projects, including commercial real estate and commercial real-estate residential housing.

The regulations also require lenders to link loan disbursements to the actual progress of a project. Disbursement is to be proportionate to stages of completion as well as equity infusion, other agreed sources of funding and the receipt of applicable clearances.

The RBI also introduced a common approach to provisioning. For projects under construction, the general provision is 1% of funded outstanding for most projects, while the requirement is 1.25% for commercial real estate and 1% for commercial real-estate residential housing. For operational projects, the corresponding rates are 0.40%, 1% and 0.75%, respectively.

These final requirements were considerably less stringent than the draft framework released in 2024, which had proposed substantially higher provisioning for under-construction projects. CRISIL said the final rules reduced concerns around the credit cost impact on lenders while retaining stronger safeguards around project-finance risks.

Consortium lending is a key concern

The proposed banking-sector alignment is particularly relevant when multiple institutions jointly finance a project. Under the RBI framework, lenders are required to have a common agreement with the borrower, although individual lenders can have different loan terms if those terms are agreed upon by the borrower and the participating lenders.

Banks are now looking to build greater consistency around the parameters used before a loan is brought under the project-finance category. The objective is not to replace individual banks' credit assessments, but to create a clearer baseline that lenders can follow when evaluating similar projects.

If the banking industry reaches an agreement, individual banks are expected to take the framework through their respective boards before making it part of their internal lending policies.

The development reflects the broader effort to make project lending more predictable while maintaining safeguards against delays, cost overruns and repayment stress in large projects. For borrowers, greater consistency among consortium lenders could also make financing structures easier to understand and manage, particularly for projects involving multiple banks and long construction periods.