MUMBAI, June 11 Reuters The lobby group for Indian nonbanking lenders on Tuesday asked for a review of a recent proposal from the central bank calling for an increase in the provisions that lenders have to set aside against infrastructure project loans.

Last month, the Reserve Bank of India RBI proposed that banks and nonbanking financial companies set aside a provision of 5 of the total loan amount of infrastructure projects at the construction phase, a sharp jump from the 0.4 required currently.

In a letter to the RBI, the Finance Industry Development Council FIDC, which represents NBFCs, has opposed the move, suggesting the provision be retained at the current level, without citing a reason.

A copy of the letter has been reviewed by Reuters.

The required provision can be increased in the face of project delays, the letter, addressed to the RBI39;s department of regulation, said.

This will ensure better project selection by the lenders.

Reuters previously reported that the rules, if implemented in the current form, could lead to a 11.5 percentage point increase in interest rates for project finance loans.

The FIDC has also opposed the central bank39;s suggestion that a minimum limit be imposed on lenders giving out loans to a project, as a way to ensure accountability for those joining a lending consortium.

Such decisions should be left to the commercial agreement between the parties, the FIDC said, instead suggesting lenders can be asked to join an agreement…