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The government is reviewing Reserve Bank of India draft rules requesting to raise provisioning in infrastructure projects, while lenders are likely to oppose them on multiple forums. Officials expressed concerns that they could lead to a rise in interest rates and derail capital expenditure momentum.
After the evaluation exercise, the draft rules will be discussed with the banking regulator during consultations, said people with knowledge of the matter. The launching of the proposals led to a slide a day earlier, in the stocks of state-owned banks, non-banking finance companies (NBFCs) and infrastructure firms, over investor worries that the norms could take a toll on financials, if implemented.
"These are draft guidelines, and the consultation process is on. All stakeholders will try to find a common ground to manage risks while supporting infrastructure financing," said a finance ministry official, adding that if banks and other ministries flag any concerns, these will be shared with RBI. The regulator has sought comments on its proposed guidelines by June 15.
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