Shares of Indian state-owned lenders slid 3.5% on Monday, set for their biggest one-day drop in nearly two months, after the country's central bank proposed lenders set aside more money to cover under-construction infrastructure projects.

The Nifty PSU bank index's 3.5% decline was the most among the 13 major sectors. All 12 index constituents were in the red, between Indian Bank's 1.8% drop and Punjab National Bank's 6.1% decrease.

Shares of non-bank lenders were affected even more deeply, with Power Finance Corp (PFC), REC and IREDA sliding between 4% and 8%. They are not on the PSU index.

The Reserve Bank of India, also the country's financial regulator, issued draft guidelines on Friday proposing banks set aside 5% of a sanctioned loan amount while the project is in construction, taking into account a lender's experience of financing such loans.

"We believe the draft norms are punitive toward incremental and existing project lending" and state-owned lenders will be most exposed if the norms get implemented, Nomura analysts said in a note.

Macquarie analysts said the new provisioning requirements apply retrospectively and not on incremental loans.

"We think this will have two implications, where provisioning requirements will go up for lenders, affecting their profitability and these companies may ration credit to project finance, further postponing the capex recovery," they added.

While the stocks of non-bank lenders fell more sharply than those of banks, analysts said such companies would likely not be as badly affected.

"The impact on PFC and REC will only be on capital adequacy ratios and not on their profits," CLSA said, adding that the companies were well capitalised. (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Savio D'Souza)