Reserve Bank of India vide its notification dated 1.4.2010 has eased asset classification infrastructure and project loan guidelines which will lower the amount of bad loans in the books of banks. In case of infrastructure projects ,RBI has increased the grace period to a total of four years if the reason for delay in starting production is because of arbitration proceeding or a court case and to three years if the delay is for reasons beyond the control of promoters. Prior to this, the bank had o classify a project loan as a  “ sub- standard “ asset if commercial operations did not start within six months of the completion of the project.

In case of project loans RBI has extended the grace period to one year from six months from the original date of commencement of commercial operations. However, the Central bank has further clarified that this dispensation will not be applicable for commercial real estate, consumer loans, capital market exposure and personal loans.

The provisioning norms on standard assets have also been increased. If the grace period for projects is six months from date of operations .the bank will have to provide 0.40% , but if it gives a grace period of one year then ,the standard provision would be 1%.In case of infrastructure projects if the grace period is two years the standard provision would be 0.40% and beyond two years it would be 1%.