PFC, REC, IREDA Shares Rally Up to 6% Amid Relaxed Project Financing Norms

PFC, REC, IREDA Shares Surge After RBI’s New Project Financing Guidelines: What Investors Should Know

The Reserve Bank of India’s (RBI) recently finalized project finance guidelines have had a significant impact on the stock market, particularly on public sector undertakings (PSUs) engaged in infrastructure funding. PFC, REC, IREDA shares witnessed impressive gains of up to 6% on June 20, 2025, following the announcement. These changes are expected to positively influence the future of infrastructure project lending in India, prompting strong investor interest in PSU stocks.

RBI Guidelines Spark Rally in PFC, REC, IREDA Shares

PFC, REC, IREDA saw renewed buying interest as the RBI’s finalized rules for project financing replaced the previously stringent draft norms. Power Finance Corporation (PFC) jumped by 6%, REC Limited rose by 3.3%, while IREDA recorded early trade gains of 1.5%. HUDCO and IRFC also saw notable momentum.

The rally in reflects investor optimism that more lenient provisioning norms will support better financial performance for these lenders, especially those heavily involved in long-gestation infrastructure projects.

What Are the New RBI Guidelines?

Under the revised RBI norms effective from October 1, 2025, the Provision Coverage Ratio (PCR) for projects under construction is now set at 1% of the total project cost. For under-construction commercial real estate (CRE) projects, the PCR will be slightly higher at 1.25%. Once a project becomes operational, the provisioning requirement is reduced to 0.4% for standard projects and 0.75% for CRE and residential housing.

These changes are particularly significant for NBFCs like IREDA and state-run lenders like PFC and REC. With reduced provisioning requirements, these firms will be able to free up capital for lending, which is a key reason why gained sharply.

Shares React to Balanced Norms

The RBI’s decision to reduce the previously proposed 5% provision for under-construction projects to a manageable 1% has been welcomed as a balanced approach. Analysts suggest this move strikes a practical middle ground—ensuring financial discipline without paralyzing credit flow to critical infrastructure sectors.

This flexibility is expected to help maintain the growth trajectory of companies like PFC and REC, which play a central role in infrastructure lending. Consequently, PFC, REC, IREDA shares are being viewed favorably by investors seeking PSU exposure with long-term potential.

Grandfathering Clause and Investor Confidence

Another key aspect of the new guidelines is the grandfathering provision, which exempts existing loans from the revised norms unless they are restructured post-October 2025. This ensures that current financial statements of companies like PFC and IREDA remain unaffected, adding to investor confidence and buoying PFC, REC, IREDA shares further.

Moreover, by allowing a staggered provisioning increase for project delays, the RBI has provided additional flexibility that is crucial in large-scale infrastructure execution, where timelines often face hurdles.

Long-Term Outlook for PFC, REC, IREDA Shares

Experts from ICRA and other rating agencies believe the updated norms reduce uncertainty in project lending. With project risk now better managed, financial institutions can look forward to more predictable outcomes. This sentiment is being reflected in the rising volumes and valuations of shares in the stock market.

Additionally, the government’s push for renewable energy and green finance aligns well with IREDA’s core business, enhancing its long-term growth potential. PFC and REC, being major lenders to power and infrastructure sectors, are expected to benefit from higher credit demand and improved loan book quality.

Impact on India’s Infrastructure Growth

The easing of RBI’s provisioning guidelines is seen as a strategic move to catalyze infrastructure growth without compromising financial stability. Lenders now have a better framework to assess project viability, support timely execution, and reduce the burden of excessive provisioning on their books.

This policy recalibration is crucial for India’s ambitious infrastructure pipeline under programs like the National Infrastructure Pipeline (NIP) and PM Gati Shakti. The positive response in PFC, REC, IREDA shares is a clear indicator that investors see these PSUs as enablers of India’s development journey.

Conclusion: Should You Watch PFC, REC, IREDA Shares?

In light of the RBI’s reformative stance and the surge in PFC, REC, IREDA shares, market analysts suggest keeping a close watch on these stocks. Their current rally could be a precursor to sustained growth if India’s infrastructure story accelerates as planned.

For long-term investors with a moderate to high-risk appetite, PFC, REC, IREDA shares offer exposure to the infrastructure lending ecosystem, with potential for attractive returns backed by robust regulatory support and evolving market sentiment.

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