RBI Offers Incentives to Infrastructure Loan Funds to Promote Diversification in Core Industry Lending

The Reserve Bank of India has relaxed certain restrictions for NBFC-IDFs, levelling the playing field with other lenders in order to enhance core sector funding through infrastructure debt funds (IDFs).

According to the new IDF rules, IDFs no longer require a sponsor. In addition, IDFs can now lend directly to Toll Operate Transfer (TOT) projects. External commercial borrowings (ECBs) are available to IDFs. For Public-Private Partnership projects, a three-party agreement is currently optional.

By obtaining long-term infra loans from banks, IDFs can contribute to the deleveraging of such institutions. Long-term lending by banks has asset-liability mismatches. There is a need for multiple types of infrastructure investors with long- term resources to ensure that risk and reward are spread out properly.