Reserve Bank of India has made a significant announcement for the Infrastructure Debt Funds (IDFs) in its Monetary Policy Committee (MPC) meeting on Thursday.
Among the key announcements, IDFs can now finance Toll Operate Transfer projects (ToT) as direct lenders. The central bank has also allowed the withdrawal of the requirement of a sponsor for the IDFs.
IDFs can also now have access to External Commercial Borrowings (ECBs) and make tri-partite agreement optional for PPP projects.
An Infrastructure Debt Funds (IDFs) provide refinancing facilities for lenders in the infrastructure sector.
These changes are expected to further augment the capacity for infrastructure financing in the country, the governor said.
Infrastructure Debt Funds (IDFs) are financial entities that direct money into the infrastructure industry. Under this arrangement, the domestic and offshore institutional investors can invest through units and bonds issued by the IDFs, which are sponsored by commercial banks and NBFCs in India.
Infradebt is an Infrastructure Debt Fund (IDF) under NBFC format was formulated by the Government of India with the objective of creating an alternative class of funding infrastructure. It brings in long term domestic/offshore institutional investors like insurance companies, provident/pension funds, etc.
Under the Reserve Bank of India’s Infrastructure – Debt Fund – Non-Banking Financial Companies (Reserve Bank) Directions, 2011, the Infrastructure Debt Fund shall be set up as a Non-Banking Financial Company conforming to and satisfying the conditions.
Shaktikanta Das has highlighted the significance of these changes saying they are expected to augment India’s infrastructure financing capacity.
The instrument was established as a distinct category of NBFCs in 2011. Since then, it has played significant role in funding crucial infra projects.
