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Infra Project NPA Norms: Time Overrun Grace Extended to 2 Years

Current · Source: Reserve Bank of India · RBI/2007-08/316 · issued 08 May 2008 · ~2 min read
Quick answerRBI has extended the grace period for classifying infrastructure projects as sub-standard from one year to two years after the original completion date, effective March 31, 2008. This provides relief for delays due to legal or extraneous reasons.
The rule, in the simplest words
How it plays out — a real example

A payments & clearing officer in Indore is reviewing a highway project loan. The project was supposed to finish in June 2007 but got delayed by 18 months due to a court case. Under the old rule, the officer would have had to mark it 'sub-standard' in June 2008. But now, with the new 2-year grace period effective March 31, 2008, the officer can keep it as 'standard' until June 2009, giving the borrower more time to start commercial production without immediate pressure to set aside extra money.

What changed

Previously, if an infrastructure project financed after May 28, 2002, began commercial production more than one year after its scheduled completion date, it was classified as sub-standard. Now, the threshold has been doubled to two years, effective from March 31, 2008. The change applies only to infrastructure projects and not to other advances.

What it means for you

Banks can now give infrastructure borrowers an additional year before tagging the account as sub-standard, reducing immediate provisioning pressure for delays beyond the original completion date. This aligns with industry representations that many delays are due to legal or external factors beyond the borrower's control. However, banks must still ensure the original completion date is clearly documented at financial closure.

What you must do

Who it affects

All scheduled commercial banks (excluding Local Area Banks and RRBs), Infrastructure project borrowers, Bank credit and risk management teams

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Does this change apply to projects financed before May 28, 2002?

No, the circular specifically applies to infrastructure projects financed by banks after May 28, 2002.

What happens if the delay exceeds two years?

If commercial production does not start within two years after the original completion date, the account must be classified as sub-standard as per the revised norms.

📜 Read the original circular — full text as issued by RBI
RBI/2007-08/316 DBOD.BP.BC.82/21.04.048/2007-08 May 8, 2008 The Chairman/Chief Executive Officer All Scheduled Commercial Banks (excluding Local Area Banks and RRBs) Dear Sir Prudential Norms on Asset Classification Pertaining to Advances – Infrastructure projects under implementation and involving time overrun Please refer to paragraph 4.2.17(iv) of our Master Circular No.DBOD.No.BP.BC.12/21.04.048/2007-08 dated July 2, 2007 on Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to advances in terms of which banks have been advised that in respect of projects financed by them after 28th May 2002, the date of completion of the project should be clearly spelt out at the time of financial closure of the project. In such cases, if the date of commencement of commercial production extends beyond a period of one year, in respect of infrastructure projects alone w.e.f. 31st March, 2007, the account should be treated as sub-standard. 2. As stated at paragraph 164 (reproduced in the Annex ) of the  Annual Policy Statement released on April 29, 2008, on a representation made in regard to delays in completion of infrastructure projects for legal and other extraneous reasons, it has been decided to modify the asset classification norms in respect of infrastructure projects as under: “In case of infrastructure projects financed by the bank after 28th May 2002, the date of completion of the project should be clearly spelt out at the time of financial closure of the project and if the date of commencement of commercial production extends beyond a period of two years (as against the current norm of one year) after the date of completion of the project, as originally envisaged, the account should be treated as sub-standard.  The revised instructions come into force w.e.f. 31st March 2008”. Yours faithfully [P. Vijaya Bhaskar] Chief General Manager  ANNEX 164. On a representation made in regard to delays in completion of infrastructure projects for legal and other extraneous reasons, the Reserve Bank undertook a review of select projects and concluded that there is merit in this representation. Accordingly, it has been decided that: In case of infrastructure projects to be financed by banks, the date of completion of the project should be clearly spelt out at the time of financial closure of the project and if the date of commencement of commercial production extends beyond a period of two years (as against the current norm of one year) after the date of completion of the project as originally envisaged, the account should be treated as sub-standard. The revised instructions will be effective from March 31, 2008.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-08/316 · issued 08 May 2008. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💰 Credit
  • Update internal asset classification policies for infrastructure loans to reflect the new two-year grace period effective March 31, 2008.
📜 Compliance
  • Ensure that the original project completion date is clearly recorded in loan documentation at financial closure for all new infrastructure advances.
  • Review existing infrastructure accounts where the delay is between one and two years to reclassify them from sub-standard to standard if they meet the revised criteria.
  • Communicate the revised norms to credit and risk teams handling infrastructure project financing.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Credit Manager at a bank this circular applies to (All scheduled commercial banks (excluding Local Area Banks and RRBs), Infrastructure project borrowers, Bank credit and risk management teams), your first concrete step on “Infra Project NPA Norms: Time Overrun Grace Extended to 2 Years” is: “Update internal asset classification policies for infrastructure loans to reflect the new two-year grace period effective March 31, 2008.” (RBI issued this 08 May 2008).

  1. Circular: RBI/2007-08/316 -- Infra Project NPA Norms: Time Overrun Grace Extended to 2 Years
  2. Issued: 08 May 2008
  3. Action required: Update internal asset classification policies for infrastructure loans to reflect the new two-year grace period effective March 31, 2008.
  4. Action required: Ensure that the original project completion date is clearly recorded in loan documentation at financial closure for all new infrastructure advances.
  5. Action required: Review existing infrastructure accounts where the delay is between one and two years to reclassify them from sub-standard to standard if they meet the revised criteria.
  6. Action required: Communicate the revised norms to credit and risk teams handling infrastructure project financing.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4170&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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