Why IREDA Shares Are Crashing 5% Today

Shares of IREDA crashed on Monday going down over 5% to hit an intraday low of ₹167.55.

What Happened: The massive slump today comes as the Reserve Bank of India (RBI) has proposed draft guidelines on project financing, which include a requirement for a 5% general provision on all existing and fresh project loans during the “construction phase”. These guidelines are expected to apply to both banks and non-bank lenders.

The provisioning requirement will cover ‘standard’ project loans for both infrastructure and non-infrastructure projects, including those in the real estate sector.

According to the draft guidelines, the standard provisions on project loans can be reduced to 2.5% once the projects become operational. A further reduction to 1% of the funded outstanding may be permitted once the project generates positive net operating cash flow sufficient to cover current payment obligations, and the long-term debt of the project has decreased by at least 20% with lenders.

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The proposed provisioning requirements represent an increase compared to the current standard provision requirement of 0.4%. The implementation of the 5% provisioning will be phased in gradually: 2% from March 2025, 3.5% from March 2026, and finally 5% from March 2027.

Shares of other non-bank lenders REC and Power Finance Corporation were also slumping heavily on Monday morning.

Price Action: IREDA’s share price was down 4.12% to trade at ₹172.25 in early trade on Monday.

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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.