Executive Summary:
This circular from the Reserve Bank of India (RBI), issued on August 18, 2023, outlines the revised regulatory framework for Infrastructure Debt Fund-Non-Banking Financial Companies (IDF-NBFCs). These revisions, made in consultation with the Government of India, aim to enhance the role of IDF-NBFCs in infrastructure financing and harmonize regulations within the NBFC sector. The new guidelines take effect immediately from the date of the circular.
Key Points / Main Content:
IDF-NBFC Definition:
* IDF-NBFCs are non-deposit-taking NBFCs that refinance infrastructure projects post-COD (at least one year of satisfactory commercial operations) and finance toll-operate-transfer (TOT) projects as direct lenders.
Capital Requirements:
* IDF-NBFCs must maintain a minimum Net Owned Funds (NOF) of ₹300 crore.
* They must also maintain a Capital-to-Risk Weighted Assets Ratio (CRAR) of at least 15%, with Tier 1 capital not less than 10%.
Fund Raising:
* IDF-NBFCs can raise funds through rupee or dollar-denominated bonds with a minimum maturity of five years.
* They can also raise funds via shorter tenor bonds and commercial papers (CPs) from the domestic market up to 10% of total outstanding borrowings.
* External Commercial Borrowings (ECBs) are permitted with a minimum tenor of five years, excluding those from foreign branches of Indian banks, and are subject to RBI's Foreign Exchange Department guidelines.
Exposure Limits:
* Exposure limits are set at 30% of Tier 1 capital for a single borrower/party.
* The limit is 50% of Tier 1 capital for a single group of borrowers/parties.
Risk Weights:
* Assets are risk-weighted as per the norms applicable to NBFC-Investment and Credit Companies (NBFC-ICCs).
Sponsorship and Tripartite Agreements:
* The requirement for a sponsor (bank or NBFC-IFC) is removed. Shareholders will undergo scrutiny like other NBFCs.
* Tripartite agreements with the concessionaire and project authority are now optional.
Other Regulatory Norms:
* Income recognition, asset classification, and provisioning norms applicable to NBFC-ICCs also apply to IDF-NBFCs.
Guidelines for NBFC Sponsorship of IDF-MFs:
* NBFCs can sponsor IDF-MFs with prior RBI approval if they meet specific criteria, including:
* Minimum NOF of ₹300 crore and CRAR of 15%.
* Net NPAs less than 3% of net advances.
* Existence for at least 5 years.
* Profitability for the last three years with satisfactory performance.
* Maintenance of regulatory CRAR and NOF levels post-investment.
* No supervisory concerns.
* Eligible NBFCs must seek prior approval from the Department of Regulation of the RBI to sponsor IDF-MFs.
Impact Analysis:
IDF-NBFCs:
* Impact: Greater flexibility in infrastructure financing and fund-raising activities due to relaxed sponsorship and tripartite agreement requirements.
* Action Required: Adhere to the revised guidelines on capital requirements, exposure limits, and other regulatory norms.
NBFCs:
* Impact: Eligible NBFCs now have the opportunity to sponsor IDF-MFs, expanding their role in infrastructure financing.
* Action Required: Assess eligibility criteria and seek prior approval from the RBI to sponsor IDF-MFs if requirements are met.
Infrastructure Sector:
* Impact: Increased access to funding through IDF-NBFCs, potentially boosting infrastructure development.
* Action Required: Infrastructure project developers can explore financing options with IDF-NBFCs under the revised guidelines.
Key Entities Referenced
Infrastructure Debt Fund-NBFCs (IDF-NBFCs): A type of non-banking financial company (NBFC) that plays a role in financing the infrastructure sector in India.
Reserve Bank of India (RBI): The central bank of India, responsible for regulating NBFCs and issuing guidelines related to external commercial borrowings (ECBs) and sponsoring Infrastructure Debt Fund Mutual Funds (IDFMFs).
Securities and Exchange Board of India (SEBI): The regulator for trust-based Infrastructure Debt Fund Mutual Funds (IDFMF).
Net Owned Funds (NOF): Minimum capital requirement of ₹300 crore for IDF-NBFCs and for NBFCs sponsoring IDFMFs.
Capital to Risk Weighted Assets Ratio (CRAR): Minimum CRAR requirement of 15 percent with minimum Tier 1 capital of 10 percent for IDF-NBFCs and for NBFCs sponsoring IDFMFs.
External Commercial Borrowings (ECBs): A route for IDF-NBFCs to raise funds with a minimum tenor of five years, subject to guidelines issued by the Foreign Exchange Department of the RBI.
NBFC-Investment and Credit Companies (NBFC-ICCs): The category of NBFCs whose risk weights are used for computing CRAR of IDF-NBFCs and whose regulatory norms are applicable to IDF-NBFCs.
Public Private Partnership (PPP): Infrastructure projects having a project authority in which IDFNBFCs can invest.
RBI/2023-24/54
DoR.SIG.FIN.REC.31/03.10.001/2023-24 August 18, 2023
All Infrastructure Debt Fund-NBFCs (IDF-NBFCs)
Dear Sir/ Madam,
Review of Regulatory Framework for IDF-NBFCs
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.
2. The revised regulatory framework for IDF-NBFCs is provided in the Annex. These
guidelines shall come into effect from the date of this circular.
Yours faithfully,
(J.P. Sharma)
Chief General Manager
िविनयमन िवभाग, क�द्रीय काया�लय ,ि�तीय तल ,मु� भवन, शहीद भगत िसंह रोड ,फोट�, मुंबई -400001
Department of Regulation, Central Office, 2nd Floor, Main Building, Shaheed Bhagat Road, Fort, Mumbai-400 001
Email: cgmicdor@rbi.org.in
िह�ी आसान ह,ै इसका प्रयोग बढाइए।Annex
An 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 the Securities and Exchange Board of
India (SEBI) whereas a company based IDF is registered as an IDF-NBFC and is
regulated by the Reserve Bank of India (RBI).
2. Definition
An IDF-NBFC means a non-deposit taking NBFC which is permitted to – (i) refinance post
commencement operations date (COD) infrastructure projects that have completed at
least one year of satisfactory commercial operations; and (ii) finance toll operate transfer
(TOT) projects as the direct lender.
3. Net owned funds (NOF) and regulatory capital
An IDF-NBFC shall be required to have an NOF of at least ₹300 crore and capital-to-risk
weighted assets ratio (CRAR) of minimum 15 per cent (with minimum Tier 1 capital of 10
per cent).
4. Raising of funds
(i) IDF-NBFC shall raise funds through issue of either rupee or dollar denominated bonds
of minimum five-year maturity. With a view to facilitate better asset-liability
management (ALM), IDF-NBFCs can raise funds through shorter tenor bonds and
commercial papers (CPs) from the domestic market to the extent of up to 10 per cent
of their total outstanding borrowings.
(ii) In addition to the bond route, IDF-NBFCs can also raise funds through loan route
under external commercial borrowings (ECBs). However, such borrowings shall be
subject to minimum tenor of five years and the ECB loans should not be sourced from
foreign branches of Indian banks.
(iii) Regarding ECBs, IDF-NBFCs shall also be required to adhere to the guidelines issued
by the Foreign Exchange Department of the RBI.
25. Exposure limits
The exposure limits for IDF-NBFCs shall be 30% of their Tier 1 capital for single borrower/
party and 50% of their Tier 1 capital for single group of borrowers/ parties.
6. 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).
7. Requirements of a sponsor and tripartite agreement
7.1 Under the earlier guidelines, an 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.
7.2 Earlier, 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.
8. 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.
9. Guidelines governing sponsorship of IDF-MFs by NBFCs
9.1 All NBFCs shall be eligible to sponsor (sponsorship as defined by SEBI Regulations
for Mutual Funds) IDF-MFs with prior approval of the RBI subject to the following
conditions (based on the audited financial statements), in addition to those prescribed by
SEBI:
(i) The NBFC shall have a minimum NOF of ₹300 crore and CRAR of 15 percent;
(ii) Its net NPAs shall be less than 3 per cent of the net advances;
(iii) It shall have been in existence for at least 5 years;
(iv) It shall be earning profits for the last three years and its performance shall be
satisfactory;
3(v) The CRAR of the NBFC post investment in the IDF-MF shall not be less than the
regulatory minimum prescribed for it;
(vi) The NBFC shall continue to maintain the required level of NOF after accounting for
investment in the proposed IDF-MF;
(vii) There shall be no supervisory concerns with respect to the NBFC.
9.2 NBFCs that fulfil the eligibility criteria as above shall approach the Department of
Regulation of the RBI, for prior approval to sponsor IDF-MFs.
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