Implications Of Draft Prudential Framework For Income Recognition, Asset Classification And Provisioning Pertaining To Advances Issued By The RBI On HAM Projects

A lot has been spoken about the potential detrimental effects of RBI's draft prudential framework applicable to financing of project loans released on May 3, 2024 ("Draft Guidelines") on various sections of the economy. While the Draft Guidelines were issued to address the underlying risks associated with the financing of projects by providing an enabling framework for the regulated entities, almost all affected players were quick to react, and they did rather scathingly, in the process raising serious doubts over the efficacy of the Draft Guidelines. It is essential to capture the implications of the Draft Guidelines on HAM (Hybrid-Annuity Model) Projects and whether the outpouring of industry wide outcry is justified.