The Reserve Bank on Friday announced guidelines for permitting banks and Non Banking Financial Companies (NBFCs) to set up Infrastructure Debt Funds (IDFs), to help meet long-term financing for the sector.
IDFs would be set up either as Mutual Funds (MFs) or NBFCs, RBI said in a statement.
Outlining the parameters for setting up IDF-MF, the central bank said an NBFC sponsoring IDF-Mutual Fund should have a minimum Net Owned Funds (NOF) of Rs. 300 crore and capital adequacy ratio of 15 per cent.
Besides, its net NPAs should be less than 3 per cent of net advances and the NBFCs should have been in existence for at least 5 years and earning profits for the last three years, it said.
Banks and NBFCs would be eligible to sponsor (as defined by SEBI Regulations for Mutual Funds) IDFs as Mutual Funds with prior approval of RBI, it said.
It also said that the Securities and Exchange Board of India (SEBI) has amended the (Mutual Funds) Regulations to provide regulatory framework for IDF-MFs.
Banks acting as sponsors to IDF-MFs would be subject to existing prudential limits including limits on investments in financial services companies and limits on capital market exposure, it said.
The Finance Minister, in his budget speech for 2011-12, had announced setting up of IDFs to accelerate and enhance the flow of long term debt in infrastructure projects for funding the government’s ambitious programmes in the sector.
The government has said that the infrastructure sector requires an investment of USD 1 trillion during the 12th Five Year Plan beginning next fiscal. Of this, 50 per cent of the funding is expected to come from the private sector.
As for the setting up of IDF-NBFC by banks and non-banking finance institutions, sponsors of NBFC-IDFs will have to contribute a minimum equity of 30 per cent and a maximum equity of 49 per cent of the IDF-NBFC.
Banks and NBFC-Infrastructure Finance Company (NBFC-IFCs) may sponsor IDFs as NBFCs with prior approval by RBI.
Post investment in the IDF, the sponsor must maintain minimum CRAR and NOF prescribed for IFCs.
The IDF should be assigned a minimum credit rating ‘A’ or equivalent of CRISIL, FITCH, CARE, ICRA or equivalent rating by any other accredited rating agencies, it said.
Tier II capital cannot exceed Tier I. Minimum capital adequacy ratio should be 15 per cent of risk weighted assets, it added.
Detailed guidelines for setting up IDFs banks and NBFCs would be issued separately, it said.