Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026

**Executive Summary** This document outlines the Reserve Bank of India's (RBI) amendment to the "Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Directions, 2025," issued on January 1, 2026. The amendment modifies the criteria for classifying infrastructure lending to projects as lending to "high-quality infrastructure projects". The Amendment Directions will be applicable when the NBFC decides to implement the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026 or from April 1, 2026, whichever is earlier. **Key Points / Main Content** * **Amendment to Directions 4(4):** * The following is inserted as a proviso to sub-paragraph 4(4) of the Directions: * Infrastructure lending to projects meeting specific criteria will be classified as lending to "high-quality infrastructure projects". * **Criteria for "High-Quality Infrastructure Projects":** * The infrastructure project must have completed at least one year of operations post achievement of the date of completion of commercial operations, without breach of any material covenants stipulated by the lenders. * The exposure is classified as 'standard' in the books of the lender. * The borrower's revenue depends on rights granted under concession / contract by the Central Government, a State Government, a public sector entity, or a statutory or regulatory body, and the contractual provisions provide for protection of these rights for the entire period of concession/ contract as long as the borrower fulfils its obligations under the contract. * The concession / contractual provisions provide for a high degree of protection for a lender, which shall, at a minimum, include: (i) provisions of an escrow / Trust and Retention Account mechanism for ringfencing the cash flows; (ii) pari-passu charge in favour of the lender over all movable and immovable assets; and (iii) mitigation of risk for lenders in case of early termination (eg. step-in rights for the lenders, minimum termination payments etc). * The borrower has sufficient internal or external financial arrangements to cover current and future working capital and other funding requirements of the project as per the assessment of the lender. * The borrower is restricted from acting to the detriment of the lender, eg. being restricted from issuing additional debt against or further encumbering the cashflows and assets of the project without consent of the existing lenders. * **Effective Date:** * The Amendment Directions shall be applicable when the NBFC decides to implement the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026 or from April 1, 2026, whichever is earlier. **Impact Analysis** **Stakeholder: Non-Banking Financial Companies (NBFCs)** * **Impact:** NBFCs are directly impacted by the revised criteria for classifying infrastructure lending as "high-quality." This affects their risk management and capital adequacy assessments. * **Action Required:** NBFCs need to assess their infrastructure lending portfolios against the new criteria and adjust their classifications and risk management practices accordingly. They also need to decide when to implement these directions. **Stakeholder: Borrowers/Infrastructure Project Developers** * **Impact:** Infrastructure project developers seeking lending from NBFCs will need to ensure their projects meet the "high-quality" criteria to potentially benefit from more favorable lending terms or increased access to funding. * **Action Required:** Borrowers should ensure their projects adhere to the criteria, particularly concerning revenue dependence, contractual provisions, and financial arrangements. **Stakeholder: Reserve Bank of India (RBI)** * **Impact:** The RBI's regulatory oversight of NBFCs is enhanced by these amendments, promoting safer and more sustainable lending practices in the infrastructure sector. * **Action Required:** No immediate action, continue monitoring NBFC compliance and assessing the effectiveness of the amended directions.

Key Entities Referenced