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Infrastructure Debt Fund-NBFCs (IDF-NBFCs)

Facts for Prelims (FFP)

 

Source: ET

 Context: The Reserve Bank of India (RBI) has issued revised guidelines for Infrastructure Debt Fund-NBFCs (IDF-NBFCs) with the aim of enhancing their role in financing the infrastructure sector.

 

About the New norm:

  • According to the new norms, IDF-NBFCs must have a minimum net owned fund (NOF) of Rs 300 crore and a capital-to-risk weighted assets ratio (CRAR) of at least 15%, with a minimum Tier 1 capital of 10%.
  • They will be allowed to raise funds through rupee or dollar-denominated bonds with at least a five-year maturity
  • The requirement for a sponsor for IDF-NBFCs has been removed, and shareholders will now undergo scrutiny similar to other NBFCs.

 

Aim: These changes are intended to facilitate a greater flow of long-term debt into infrastructure projects and harmonize financing regulations in the infrastructure sector.

 

What are IDF-NBFCs?

Infrastructure Debt Fund-Non-Banking Financial Companies (IDF-NBFCs) are specialized financial entities registered as NBFCs with the purpose of facilitating the flow of long-term debt into infrastructure projects.

  • They raise funds by issuing bonds, typically with a minimum maturity of five years, to support infrastructure development.
  • These entities play a crucial role in financing large-scale infrastructure projects in sectors like transportation, energy, and telecommunications.

NBFC permitted to:

  • Refinance infrastructure projects that have completed at least one year of commercial operations
  • Finance Toll-Operate-Transfer (TOT) projects as a direct lender.