These draft guidelines aim to enhance appraisal mechanisms and discipline in consortium financing, focusing on plugging loopholes to prevent NPAs.

In view of these additional requirements, the following lenders are likely to be highly impacted:

• Lenders exclusively following RBI’s provisioning norms
• Lenders with high exposure to under-construction projects with long gestation periods (such as general infra, fossil fuel, etc.) in their AUM

IREDA is likely to face limited impact, given our alignment with higher provisioning standards that ensure resilience to these additional norms. More specifically,

• RE Projects that IREDA finances (such as solar and wind projects) typically have shorter construction periods compared to other infrastructure-financing NBFCs.
• Our Portfolio largely consists of commissioned projects already in the operational phase, thereby limiting the impact of additional provisioning requirements.
• IREDA follows IND AS accounting standards that has resulted in additional provisions of around 92 Cr over the existing RBI norms on Income Recognition, Asset Classification, and Provisioning (IRACP), as of March 31, 2024. Any impact of the increase in RBI provisioning requirements will be offset by this cushion.

Profit After Tax (PAT) is expected to be largely unaffected, while there may be marginal impacts on Net Worth and Capital Adequacy Ratio (CRAR). However, with our currently healthy CRAR levels, any marginal impact can be accommodated accordingly.

Overall, these draft guidelines are poised to improve asset quality and encourage disciplined practices among NBFCs and banks.