Skip to main content

Regulatory Framework for IDF-NBFCs

Reserve Bank of India (RBI) has revised the regulatory framework for Infrastructure Debt Fund - Non Banking Financial Companies (IDF-NBFCs).

What is Infrastructure Debt Fund - Non Banking Financial Company (IDF-NBFC)?

An Infrastructure Debt Fund - Non Banking Financial Company (IDF-NBFC) means a non-deposit taking Non Banking Financial Company (NBFC) which is permitted to – 

  • Refinance post commencement operations date (COD) infrastructure projects that have completed at least 1 year of satisfactory commercial operations. 
  • Finance toll operate transfer (TOT) projects as the direct lender.

Commencement of Operations Date (COD) means the date when the Service Provider begins the operations of the project pursuant to the issuance of Completion Certificate by the Authority.

In what forms can Infrastructure Debt Fund (IDF) be set up?

An Infrastructure Debt Fund (IDF) is set up either as a trust or as a company. 

  • A trust based IDF is registered as an IDF-Mutual Fund (IDF-MF) and is regulated by Securities and Exchange Board of India (SEBI).
  • A company based IDF is registered as an IDF-NBFC and is regulated by Reserve Bank of India (RBI).

What are the regulatory norms for IDF-NBFC?

Net owned funds (NOF) At least ₹300 crore
Capital-to-risk weighted assets ratio (CRAR) At least 15% (with minimum Tier 1 capital of 10%)
Exposure limits 30% of their Tier 1 capital for single borrower / party
50% of their Tier 1 capital for single group of borrowers / parties
Risk weights For computing CRAR of the IDF-NBFCs, their assets shall be risk-weighted as per risk-weights applicable to NBFC-Investment and Credit Companies (NBFC-ICCs).
Other regulatory norms All other regulatory norms including income recognition, asset classification and provisioning norms as applicable to NBFC-ICCs shall be applicable to IDF-NBFCs.

How can IDF-NBFC raise funds?

IDF-NBFC can raise funds through bond route and loan route.

Bond route –

  • IDF-NBFC shall raise funds through issue of either rupee / dollar denominated bonds of minimum 5-year maturity. 
  • IDF-NBFCs can raise funds through shorter tenor bonds and commercial papers (CPs) from the domestic market up to 10% of their total outstanding borrowings.

Loan route –

  • IDF-NBFCs can raise funds under external commercial borrowings (ECBs). 
  • ECB borrowings shall be subject to minimum tenor of 5 years.
  • ECB loans should not be sourced from foreign branches of Indian banks.

What are the guidelines on sponsor and tripartite agreement?

Previous Guidelines Revised Guidelines
IDF-NBFC was required to be sponsored by a bank or an NBFC-Infrastructure Finance Company (NBFC-IFC). The requirement of a sponsor for an IDF-NBFC has now been withdrawn and shareholders of IDF-NBFCs shall be subjected to scrutiny as applicable to other NBFCs, including NBFC-IFCs.
IDF-NBFCs were required to enter into a tripartite agreement with the concessionaire and the project authority for investments in the Public Private Partnership (PPP) infrastructure projects having a project authority. The requirement of the tripartite agreement has now been made optional.

“Concessionaire” means a party which has entered into an agreement called ‘Concession Agreement’ with a Project Authority, for developing infrastructure.

What are the guidelines for sponsoring IDF-MF?

All NBFCs shall be eligible to sponsor IDF-MFs with prior approval of RBI subject to the following conditions, in addition to those prescribed by SEBI –

  1. NBFC shall have a minimum NOF of ₹300 crore and CRAR of 15%.
  2. Its net NPAs shall be less than 3% of the net advances.
  3. It shall have been in existence for at least 5 years.
  4. It shall be earning profits for the last 3 years and its performance shall be satisfactory.
  5. CRAR of the NBFC post investment in the IDF-MF shall not be less than the regulatory minimum prescribed for it.
  6. NBFC shall continue to maintain the required level of NOF after accounting for investment in the proposed IDF-MF.
  7. There shall be no supervisory concerns with respect to the NBFC.


References

Reserve Bank of India. (2023, August 18). 'Review of Regulatory Framework for IDF-NBFCs'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12528&Mode=0


Follow at - Telegram   Instagram   LinkedIn   Twitter   Facebook

Comments

Popular Posts

Highlights of RBI Annual Report 2023-24 – Chapter 7 to 12

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. In a series of articles, we will go through the highlights of the report. This is the fifth and last article in the series.  Chapter 7 – Public Debt Management Ways And Means Advances (WMA) limit for the Government of India (GoI) for H1:2023-24 (April to September 2023) was fixed at ₹1,50,000 crore and for H2:2023-24 (October 2023 to March 2024) was fixed at ₹50,000 crore. RBI issued an ultra-long security of 50-year tenor aggregating ₹30,000 crore to cater to the growing needs of long-term institutional players. Issuance of Sovereign Green Bonds (SGrBs) for an aggregate amount of ₹20,000 crore included maiden issuance of 30-year (₹10,000 crore) SGrB in addition to 5-year (₹5,000 crore) and 10-year (₹5,000 crore) SGrBs. A new 3-year benchmark security was introduced as part of government market borrowing programme during H1:2023-24.  The basket of products offered through the ‘Retail ...

Lending against Gold and Silver collateral

Reserve Bank of India (RBI) has issued directions on lending against the collateral of gold and silver. To whom are the directions applicable? The directions are applicable to the following regulated entities (REs) – Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks, but excluding Payments Banks). Primary (Urban) Co-operative Banks (UCBs) & Rural Co-operative Banks (RCBs), i.e., State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs). Which loans are covered under the directions? The directions shall apply to all loans offered by an RE for the purpose of consumption or income generation (including farm credit) where eligible gold or silver collateral is accepted as a collateral security. What is eligible collateral? Eligible collateral means the collateral of jewellery, ornaments or coins made of gold or silver. A lender shall not grant any ad...

Due Diligence of AePS Touchpoint Operators

Reserve Bank of India (RBI) has issued directions on due diligence of Aadhaar Enabled Payment System (AePS) touchpoint operators. What is Aadhaar Enabled Payment System (AePS)? Aadhaar Enabled Payment System (AePS) is a payment system in which transactions are enabled through Aadhaar number and biometrics / OTP authentication providing financial services such as cash withdrawal, cash deposit, fund transfer, and non-financial services such as mini statement and balance enquiry, etc. AePS is a payment system operated by National Payment Corporation of India (NPCI) that facilitates interoperable transactions using Aadhaar enabled authentication.  What is AePS touchpoint? AePS touchpoint is the terminal deployed by acquirer banks to facilitate AePS transactions, which shall include both mobile and fixed points. Who is AePS Touchpoint Operator (ATO)? AePS Touchpoint Operator (ATO) is the individual onboarded by the acquiring bank who operates the AePS touchpoint. What is the rationale b...

Pre-payment Charges on Loans

Reserve Bank of India (RBI) has issued directions on pre-payment charges on loans. What issues were observed by RBI during supervisory reviews? Divergent practices were observed amongst Regulated Entities (REs) with regard to levy of pre-payment charges in case of loans sanctioned to Micro and Small Enterprises (MSEs) which lead to customer grievances and disputes.  Certain REs were found to include restrictive clauses in loan contracts / agreements to deter borrowers from switching over to another lender, either for availing lower rates of interest or better terms of service. To whom shall the directions be applicable? The directions shall apply to all commercial banks (excluding payments banks), co-operative banks, Non-Banking Financial Companies (NBFCs) and All India Financial Institutions (AIFIs). To which loans shall the direction be applicable? The directions shall be applicable to all floating rate loans and advances sanctioned or renewed on or after January 01, 2026. Which ...

Prior approvals from or intimations / reporting to RBI by NBFC-BL

Non-Banking Financial Companies (NBFCs) are required to obtain prior approvals from Reserve Bank of India (RBI) or intimate / report to RBI various events. This article lists out some of such important events where prior approvals or intimations / reporting is required for Base Layer NBFCs (NBFC-BL). Events requiring prior approval from RBI  Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023 Para 30 – NBFCs shall prepare its balance sheet and profit and loss account as on March 31 every year. Whenever an NBFC intends to extend the date of its balance sheet as per provisions of the Companies Act, 2013, it shall take prior approval of RBI before approaching the Registrar of Companies for this purpose. Even in cases where RBI and the Registrar of Companies grant extension of time, the NBFC shall furnish to RBI a proforma balance sheet (unaudited) as on March 31 of the year and the statutory returns ...