The Reserve Bank of India (RBI) has recently unveiled a comprehensive set of updated guidelines for Infrastructure Debt Fund-Non-Banking Financial Companies (IDF-NBFCs), reflecting its commitment to fortify the financial backbone of the infrastructure sector. These revisions, formulated in conjunction with the Government of India, serve a dual purpose: elevating the role of IDF-NBFCs in infrastructure financing while harmonizing the regulatory framework governing infrastructure sector financing by Non-Banking Financial Companies (NBFCs).
In accordance with the new mandates, IDF-NBFCs are now obliged to uphold a minimum Net Owned Fund (NOF) of Rs 300 crore. This criterion serves as a cornerstone, ensuring that these entities possess the requisite financial robustness to actively participate in the complex landscape of infrastructure financing.
The recalibrated guidelines have also set a clear Capital-to-Risk Weighted Assets Ratio (CRAR) threshold of not less than 15%, accompanied by a minimum Tier 1 capital of 10%. This judicious capital adequacy provision functions as a safeguard, shielding the financial stability of IDF-NBFCs as they channel vital resources into diverse infrastructure projects.
A pivotal change revolves around the fundraising avenues available to IDF-NBFCs. The guidelines authorize them to issue bonds denominated in either rupees or dollars, subject to a minimum maturity period of five years. This strategic shift ensures a steady inflow of long-term debt, laying a firm foundation for the sustenance of multifarious infrastructure endeavors.
Recognizing the imperative of effective asset-liability management (ALM), the updated framework allows IDF-NBFCs to secure funds through shorter tenor bonds and commercial papers (CPs) from the domestic market. This strategic provision, capped at 10% of their total outstanding borrowings, empowers them with agility in managing their financial position.
In a departure from the prior regulatory stance, the mandatory sponsorship requirement for IDF-NBFCs has been removed. Instead, shareholders of IDF-NBFCs are subjected to a consistent scrutiny process aligned with the norms applicable to other NBFCs, including NBFC-Infrastructure Finance Companies (NBFC-IFCs). This shift establishes a level regulatory playing field across the diverse spectrum of the NBFC sector.
The scope of sponsors for Infrastructure Debt Fund-Mutual Funds (IDF-MFs) has also been broadened through these guidelines. All NBFCs can now undertake the sponsorship of IDF-MFs, subject to prior approval from RBI and adherence to stipulated conditions. This inclusive measure is poised to infuse fresh dynamism into the sector while upholding regulatory diligence.