Infrastructure Finance Companies (IFCs)

Q.1. What is an Infrastructure finance?

Ans “Infrastructure loan” means a credit facility extended by NBFCs to a borrower for exposure in the following infrastructure sub-sectors:

Sl.No.CategoryInfrastructure sub-sectors
1.Transporti. Roads and bridges
ii. Ports
iii. Inland Waterways
iv. Airport
v. Railway Track, tunnels, viaducts, bridges1
vi. Urban Public Transport (except rolling stock in case of urban road transport)
2.Energyi. Electricity Generation
ii. Electricity Transmission
iii. Electricity Distribution
iv. Oil pipelines
v. Oil/Gas/Liquefied Natural Gas (LNG) storage facility2
vi. Gas pipelines3
3.Water & Sanitationi. Solid Waste Management
ii. Water supply pipelines
iii. Water treatment plants
iv. Sewage collection, treatment and disposal system
v. Irrigation (dams, channels, embankments etc)
vi. Storm Water Drainage System
4.Communicationi. Telecommunication (Fixed network) 4
ii. Telecommunication towers
5.Social and Commercial Infrastructurei. Education Institutions (capital stock)
ii. Hospitals (capital stock)5
iii. Three-star or higher category classified hotels located outside cities with population of more than 1 million
iv. Common infrastructure for industrial parks, SEZ, tourism facilities and agriculture markets
v. Fertilizer (Capital investment)
vi. Post harvest storage infrastructure for agriculture and horticultural produce including cold storage
vii. Terminal markets
viii. Soil-testing laboratories
ix. Cold Chain6

Notes:

1. Includes supporting terminal infrastructure such as loading/unloading terminals, stations and buildings

2. Includes strategic storage of crude oil

3. Includes city gas distribution network

4. Includes optic fibre/cable networks which provide broadband / internet

5. Includes Medical Colleges, Para Medical Training Institutes and Diagnostics Centres

6. Includes cold room facility for farm level pre-cooling, for preservation or storage of agriculture and allied produce, marine products and meat.

Q.2. What is an IFC and what are the eligibility or entry point norms for registration of an IFC-NBFC with RBI?

Ans : IFC is a non-deposit accepting loan company which complies with the following :

  1. A minimum of 75 per cent of the total assets of an IFC-NBFC should be deployed in infrastructure loans;
  2. The company should have minimum net-worth of Rs 300 crore,
  3. The CRAR of of the company should be at 15% with Tier I capital at 10% and
  4. The minimum credit rating of the company should be at ‘A’ or equivalent of CRISIL, FITCH, CARE, ICRA, BRICKWORK or equivalent rating by any other accrediting rating agencies.

Their request must be supported by a certificate from their Statutory Auditors confirming the asset pattern of the company as on March 31, of the latest financial year

Q.3. What are the credit concentration norms for IFCs?

Ans : IFCs may exceed the concentration of credit norms as provided in paragraph 18 of the aforesaid Directions as under:

i. In lending to

a. any single borrower by ten per cent of its owned fund, (i.e at 25% of Owned Funds) and

b. any single group of borrowers by fifteen per cent of its owned fund, (i.e. at 40% of Owned Funds)

ii. In lending and investing (loans/investments taken together) by

a. five percent of its owned fund to a single party, (i.e.at 30% of Owned Funds); and

b. ten percent of its owned fund to a single group of parties, (i.e. at 50% of Owned funds).

iii. The extant norms for investment for both single party and single group of parties will remain same as in Para 18 of the Directions, i.e.

a. Investment in shares of another company cannot exceed 15% of its Owned Funds

b. Investment in shares of a single group of companies cannot exceed 25% of its Owned Funds.

Q.4. What is the risk weight IFCs have to maintain on assets covering PPP and which have completed one year of commercial production?

Ans: Infrastructure Finance Companies can maintain risk weight at 50% for assets covering PPP and post commercial operations date (COD) projects which have completed at least one year of satisfactory commercial operations and which are backed by a buyback guarantee by a designated Project / Statutory authority under a Tripartite Agreement.

Q.5. What constitutes ‘credit facility’ under the definition of infrastructure loan?

Ans: The term ‘credit facility’ means a term loan, project loan subscription to bonds/ debentures/ preference shares/ equity shares in a project company acquired as a part of project finance package such that such subscription amounts to be “in the nature of advance” or any other form of long term funded facility provided to a borrower company engaged in developing/ operating and maintaining/ developing, operating and maintaining infrastructure facilities, that is a project in any of the sub-sectors as specified in the definition of infrastructure loan.

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