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JC - Legal Updates - Reviewed Framework: IDF-NBFCs

Legal Updates

23 Aug 2023

Reviewed Framework: IDF-NBFCs

Brief Overview:
RBI has revised the regulatory framework for Infrastructure Debt Fund - Non-Banking Financial Companies (“IDF-NBFCs”) whereby, inter alia specifying capital requirement, source of funds, exposure limits and other miscellaneous regulations.
Technical Details:
●  Capital Requirement:  Net owned fund of at least INR 300,000,000 and capital-to-risk weighted assets ratio of minimum 15 percent (with minimum Tier 1 capital of 10 percent).
●  Sources of Funds: Rupee or dollar-denominated bonds, commercial papers, and external commercial borrowings (“ECBs”) with a tenor of a minimum of 5 years however such ECBs shall not be raised from foreign branches of Indian banks.
●  Exposure limits:  30% of their Tier 1 capital for a single borrower/party and 50% of their Tier 1 capital for a single group of borrowers/parties.
●  Requirement for a sponsor for IDF-NBFC shall no longer be mandatory.
  Requirement of a tripartite agreement for investments in PPP infrastructure projects has now been made optional.
●  Risk weights as applicable to NBFC-Investment and Credit Companies (NBFC-ICCs).
●  Income recognition, asset classification, and provisioning norms as applicable to NBFC-ICCs shall be applicable to IDF-NBFCs.
●  The framework also provides for guidelines ‘governing sponsorship of IDF-MFs by NBFCs’.
JC Key Takeaways:
RBI has relaxed the regulatory requirements of IDF-NBFCs and has broadened the platform for financing the infrastructure sector by NBFCs by removing some of the key impediments. This shall help harmonise the regulations governing the financing of infrastructure sector by NBFCs. 
For further details, please see:
For any queries / clarifications, please feel free to ping us and we will be happy to chat:

Mr. Vedanarayanan Lakshmanan (ved.lakshmanan@jclex.com)
  Mr. Ankit Sinha (ankit.sinha@jclex.com)
  Ms. Rupul Jhanjee (rupul.jhanjee@jclex.com