RBI Eases Regulations for Infrastructure Debt Funds
The Reserve Bank of India has relaxed regulations for Infrastructure Debt Funds (IDF) to allow them greater access to funds, which will increase infrastructure financing.
The RBI has removed the requirement for an IDF sponsor. In addition, the central bank has permitted IDFs to finance Toll Operate Transfer (ToT) projects as direct lenders, access to External Commercial Borrowings (ECBs), and the option to waive tripartite agreements for PPP projects.
"A review of the existing regulatory framework for IDFs has been undertaken in consultation with the Government of India to enable the IDFs to play a greater role in infrastructure financing and to move towards the regulatory objective of harmonizing regulations applicable to various categories of NBFCs." Shaktikanta Das, Governor of the Reserve Bank of India, said while announcing the bi-monthly monetary policy.
In 2011, an infrastructure debt fund was established as a distinct category of non-banking finance companies. Institutional investors invest in IDFs through units and bonds issued by commercial banks and NBFCs in India. The majority of IDFs have been established as NBFCs.
"It will enable Infrastructure Debt Funds to play a greater role in the financing of the infrastructure sector and will also provide them with better access to funds through External Commercial Borrowings," said Utsav Johri partner JSA.
The RBI will soon issue a detailed circular.