Indian lenders are set to appeal against a proposal by the central bank to tighten regulations for infrastructure project loans. The Indian Banks Association (IBA) will write to the Reserve Bank of India (RBI) opposing the implementation of higher provisions for under-construction projects. The central bank’s proposal suggests that banks should allocate 5% of the loan amount as a provision for projects in the construction phase, which can be reduced to 2.5% once the project becomes operational, and 1% when a certain level of cash flow is achieved. However, this could lead to a 1-1.5 percentage point increase in interest rates for project finance loans, which could negatively impact sectors such as renewable energy that operate on thin margins. Lenders will seek a reduction in the levy. The government has not yet finalised its stance on the rules, but it is important to consider unintended consequences such as a potential reluctance to lend for under-construction projects.