In a move set to unlock significant financing for India’s infrastructure sector, the Reserve Bank of India (RBI) has announced a major relaxation in provisioning norms for banks’ lending to under-construction infrastructure projects. According to a report by Moody’s, the new guidelines-effective from October 1, 2025-will reduce the mandatory provision on such loans from 5 per cent to just 1 per cent, marking a significant shift in the central bank’s risk-weight approach.
This regulatory change is expected to ease pressure on bank balance sheets, thereby increasing their willingness to extend credit to large-scale infrastructure ventures. Projects in sectors such as highways, railways, ports, airports, and urban development, which typically require massive upfront capital and involve long gestation periods, often face financing hurdles due to perceived credit risk. The revised norms are now likely to encourage banks to re-enter this space more aggressively.
For the steel industry, this is particularly good news. Steel is a core material in most infrastructure developments-from bridges and tunnels to high-rise buildings and logistics hubs. A credit revival in the infrastructure space will directly drive demand for structural steel, TMT bars, plates, and other heavy construction materials, supporting growth across integrated steel producers and rolling mills alike.
Moreover, this move aligns with India’s ambitious goal of achieving a $5 trillion economy, where infrastructure expansion plays a pivotal role. With banks incentivized to lend and developers more confident about capital access, the ecosystem for steel-intensive infrastructure is poised for acceleration.
The reform has been welcomed by stakeholders across the financial and construction sectors. As Moody’s notes, this change could “meaningfully improve credit availability for long-gestation projects,” setting the stage for a stronger, steel-fueled infrastructure pipeline in the years ahead.
