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RBI Revises Guidelines for Infrastructure Debt Funds (IDF-NBFCs)

  • 22 Aug 2023

On 18th August, 2023, the Reserve Bank of India (RBI) introduced new requirements for Infrastructure Debt Fund-NBFCs (IDF-NBFCs), including a minimum net owned fund (NOF) of Rs 300 crore and a capital-to-risk weighted assets ratio (CRAR) of at least 15%, with a minimum Tier 1 capital of 10%.

Key Points

  • New Requirements for IDF-NBFCs: RBI has issued revised guidelines for Infrastructure Debt Funds - Non-Banking Financial Companies (IDF-NBFCs).
  • IDF-NBFCs are now required to maintain a minimum Net Owned Fund of Rs 300 crore and a CRAR of at least 15%, with a minimum Tier 1 capital of 10%.
  • Definition of IDF-NBFC Revised: The revised definition of an IDF-NBFC specifies that it is a non-deposit-taking NBFC authorized 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.
  • Fundraising and ALM: IDF-NBFCs are permitted to raise funds through rupee or dollar-denominated bonds with a minimum maturity of five years.
  • They can also use shorter tenor bonds and commercial papers (CPs) up to 10% of their total outstanding borrowings for better asset-liability management (ALM).
  • External commercial borrowings (ECBs) with a minimum tenure of five years, not sourced from foreign branches of Indian banks, can also be utilized.
  • Exposure Limits and Risk Weights: IDF-NBFCs are subject to exposure limits, allowing up to 30% of their Tier 1 capital for a single borrower or party and up to 50% for a single group of borrowers or parties.
  • Changes in Sponsorship Requirements: The requirement for sponsorship of IDF-NBFCs by banks or NBFC-Infrastructure Finance Companies (NBFC-IFCs) has been removed.
  • The need for a tripartite agreement with concessionaires and project authorities for investments in Public-Private Partnership (PPP) infrastructure projects is now optional.
  • Eligibility Criteria for NBFCs to Sponsor IDF-MFs: RBI has outlined eligibility criteria for NBFCs to sponsor Infrastructure Debt Funds-Mutual Funds (IDF-MFs).
  • These criteria include factors such as net owned funds, net NPAs, years of existence, profitability, and other supervisory concerns.