‘Infra funds to be floated as MFs or NBFCs’

Banks and NBFCs would be eligible to sponsor (as defined by SEBI Regulations for Mutual Funds) IDFs as mutual funds with prior approval of the 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 and NBFC-infrastructure finance companies (NBFC-IFCs) may sponsor IDFs as NBFCs with prior approval by the 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.

Banks or other firms who want to sponsor IDFs through the NBFC route will have to contribute a minimum equity of 30 per cent and a maximum equity of 49 per cent in the new entity. “The IDF should invest only in PPP and post COD infrastructure projects which have completed at least one year of satisfactory commercial operation and are a party to a Tripartite Agreement with the concessionaire and the Project Authority for ensuring a compulsory buyout with termination payment,” the RBI said.

The maximum exposure that an IDF can take to a borrower or a group of borrowers will be at 50 per cent of its total capital funds. “Additional exposure up to 10 per cent would be allowed at the discretion of the Board of the IDF-NBFC. Boards of IDFs will be required to frame appropriate policies governing risk,exposure etc. Limited additional exposure over 60 per cent could be taken with RBI’s prior approval,” it said.

Funding the Infra Sector

* Banks sponsoring IDF-MFs will be subject to existing limits,including limits on investments in financial services firms and limits on capital market exposure

* An NBFC sponsoring IDF-Mutual Fund should have a minimum net owned funds of Rs 300 crore and CRAR of 15%

* Sponsors of NBFC- IDFs will have to contribute a minimum equity of 30% and a maximum equity of 49% of the IDF-NBFC

* Banks or other firms who want to sponsor IDFs through the NBFC route will have to put minimum equity of 30% and a maximum of 49%