In order to enable Infrastructure Debt Fund-NBFCs (‘IDF-NBFCs’) to play a greater role in financing of the infrastructure sector and to harmonise regulations governing financing of the infrastructure sector by non-banking financial companies (‘NBFCs’), the RBI has, on August 18, 2023, issued a revised regulatory framework for IDF-NBFCs (‘Revised Framework’) effective immediately.
Some of the key changes under the Revised Framework are as follows:
i. The purposes for which IDF-NBFCs can undertake financing in the infrastructure sector has now been clarified and IDF-NBFCs are now authorized to: (a) refinance infrastructure projects post commencement operations date that have completed at least one year of satisfactory commercial operations; and (b) finance toll operate transfer projects as the direct lender;
ii. IDF-NBFCs can now borrow funds through issuance of rupee-denominated or dollar-denominated bonds with a minimum five-year maturity, as well as through issuance of shorter tenor bonds and commercial papers from the domestic market upto the prescribed limit and through loans under the external commercial borrowing route, subject to certain additional conditions;
iii. The requirement for an IDF-NBFC to be sponsored by a bank or an NBFC-IFC has been dispensed with and shareholders of IDF-NBFCs will now be subject to the same scrutiny as applicable to those of other NBFCs;
iv. The requirement for an IDF-NBFC to execute a tripartite agreement with a concessionaire and project authority for investments in public private partnership infrastructure projects having a project authority has been dispensed with, and this has now been made optional; and
v. The Revised Framework sets out the exposure limits, risk weights, net owned fund requirements and capital-to-risk weighted assets ratio requirements for IDF-NBFCs and clarifies that other regulatory norms, including income recognition, asset classification and provisioning norms as applicable to NBFC – Investment and Credit Companies (NBFC-ICCs) are also applicable to IDF-NBFCs.