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IRDAI Issues Circular to Boost Investment in Infrastructure Sector

The Insurance Regulatory and Development Authority of India (IRDAI) has come out with a circular doing away with the requirement of case-to-case approval for insurers to invest in Infrastructure Debt Funds (IDFs).

For investment in IDFs backed by the Central Government, IRDAI (Investment Regulations), 2016, envisaged case-to-case approval by the Authority. The decision to do away with the requirement of case-to-case approval has been made to boost investment in the infrastructure sector and enhance ease of doing business. The circular dated January 5, 2024, also refers to the recent decision of the Reserve Bank of India (RBI) enabling IDF-NBFCs to play a greater role in financing of the infrastructure sector. As per the revised regulatory framework released by RBI in August 2023, the requirement of a sponsor for an IDF-NBFC was withdrawn and shareholders of IDF-NBFCs were held to be subject to scrutiny as applicable to other NBFCs.[1] However, the RBI has withdrawn this notification.

The permission granted under IRDAI’s circular is subject to certain conditions. These are as follows: –

  • Investment should be made in an IDF-NBFC which is registered with the RBI.
  • The residual tenure of the debt securities cannot be less than 5 years.
  • A minimum credit rating of ‘AA’ or its equivalent by a Credit Rating Agency registered with the Securities and Exchange Board of India (SEBI) to be eligible for approved investments.
  • Exposure to a public limited infrastructure investee company has to be as per the norms prescribed under Note 3 of Regulation 9 of the 2016 Regulations.

[1] https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12528&Mode=0