RBI Revises Guidelines for Infrastructure Debt Fund-NBFCs, Sponsorship Of IDF-MFs By NBFCs

An IDF-NBFC refers to a non-deposit-taking NBFC that is authorised to refinance infrastructure projects that have completed at least one year of satisfactory commercial operations

Now, to qualify as an IDF-NBFC, entities must adhere to specific net owned funds (NOF) and regulatory capital requirements. 

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An Infrastructure Debt Fund-NBFC (IDF-NBFC) will now be required to have a net owned fund (NOF) of at least Rs 300 crore and a capital-to-risk weighted assets ratio (CRAR) of minimum 15 per cent (with minimum Tier 1 capital of 10 per cent), said the Reserve Bank's revised norms on Friday. 

In a release, the Reserve Bank of India (RBI) detailed the revised guidelines for Infrastructure Debt Funds - Non-Banking Financial Companies (IDF-NBFCs) and the sponsorship of Infrastructure Debt Funds - Mutual Funds (IDF-MFs) by Non-Banking Financial Companies (NBFCs).

The RBI said, "In order to enable IDF-NBFCs to play a greater role in the financing of the infrastructure sector and to harmonise the regulations governing financing of infrastructure sector by the NBFCs, a review of the guidelines applicable to IDF-NBFCs has been undertaken, in consultation with the Government of India."

According to the revised definition, an IDF-NBFC refers to a non-deposit-taking NBFC that is authorised to refinance infrastructure projects that have completed at least one year of satisfactory commercial operations. Additionally, IDF-NBFCs can directly finance toll-operate-transfer (TOT) projects. To qualify as an IDF-NBFC, entities must adhere to specific net owned funds (NOF) and regulatory capital requirements. 

The guidelines said that IDF-NBFCs are allowed to raise funds through rupee or dollar-denominated bonds with a minimum maturity of five years. For better asset-liability management (ALM), they can also utilise shorter tenor bonds and commercial papers (CPs) up to 10 per cent of their total outstanding borrowings. Additionally, external commercial borrowings (ECBs) can be used, provided they have a minimum tenure of five years and are not sourced from foreign branches of Indian banks.

IDF-NBFCs are also subject to exposure limits, allowing up to 30 per cent of their Tier 1 capital for a single borrower or party and up to 50 per cent for a single group of borrowers or parties. Risk weights are determined based on risk weights applicable to NBFC-Investment and Credit Companies (NBFC-ICCs) for computing CRAR.

The requirement for sponsorship of IDF-NBFCs by banks or NBFC-Infrastructure Finance Companies (NBFC-IFCs) has been removed. Shareholders of IDF-NBFCs will now be evaluated similarly to other NBFCs. The need for a tripartite agreement with concessionaires and project authorities for investments in Public-Private Partnership (PPP) infrastructure projects is now optional.

The RBI has also outlined eligibility criteria for NBFCs to sponsor IDF-MFs. These criteria include factors such as net owned funds, net NPAs, years of existence, profitability, and other supervisory concerns.