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What Is Infrastructure Finance Company In India

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Introduction

The Infrastructure Finance Company is a financial institution engaged in the principal business of providing infrastructure loans to companies. Infrastructure Finance Company provides credit facilities to the borrowers in the specific infrastructure sectors. The creation of a separate category of NBFC’S (NBFC-IFC), expected to plays a major role in the banking industry as a provider of infrastructure finance.

When Infrastructure Finance Company can be formed?

As per RBI, an NBFC can be registered as Infrastructure Finance Company only if it complies with the following conditions:

a) A minimum of 75% of the total assets of the company shall deploy in infrastructure loans,

b) The minimum Net Owned Funds of ? 300 crores,

c) The company ought to have a minimum credit rating of ‘A ‘or equivalent of CRISIL, FITCH, CARE, ICRA or equivalent to any other accrediting rating agencies.

d) The CRAR (Capital to risk-weighted asset ratio) of 15% with Tier I capital at 10%. 

 

Note: The Company’s request must be supported by a certificate from their Statutory Auditors confirming the company’s asset pattern as on March 31, of the latest financial year.

What is an Infrastructure Loan?

Infrastructure Loan is a credit facility extended by NBFC’s to a borrower for the following categories which are classified as Infrastructure Loan. The term credit facility means a term loan, project loan subscription to bonds/ debentures/ preference shares/ equity shares in the project company obtain as a part of project finance package such that such subscription amounts to be “in the nature of advance” or any other setup 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 sub-sectors project as specified in the definition of infrastructure loan.

 

Following are the categories of Infrastructure sectors and sub-sectors:-

 

1) TRANSPORT: Roads and bridges, Ports, Inland Waterways, Airport, Railway Track, tunnels, viaducts, bridges, Urban Public Transport (except rolling stock in case of urban road transport)

 

2) ENERGY: Electricity Generation, Electricity Transmission, Electricity Distribution, Oil pipelines, Oil/Gas/Liquefied Natural Gas (LNG) storage facility, Gas pipelines.

 

 

3) WATER & SANITATION: Solid Waste Management, Water supply pipelines, Water treatment plants, Sewage collection, treatment and disposal system, Irrigation (dams, channels, embankments etc.), Storm Water Drainage System.

 

4) COMMUNICATION: Telecommunication (Fixed network), Telecommunication towers

 

 

5) SOCIAL & COMMERCIAL INFRASTRUCTURE: Education Institutions (capital stock), Hospitals (capital stock), Three-star or higher category classified hotels located outside cities with population of more than 1 million, Common infrastructure for industrial parks, SEZ, tourism facilities and agriculture markets, Fertilizer (Capital investment), Post harvest storage infrastructure for agriculture and horticultural produce including cold storage, Terminal markets, Soil-testing laboratories, Cold Chain

Norms for Infrastructure Finance Company for granting Credit/Loan:

Infrastructure Finance Company grants credit on the following basis:

 

  • i. In lending to

a) any single borrower by 10% of its owned fund, (i.e. at 25% of Owned Funds); and

b) any single group of borrowers by 15% of its owned fund, (i.e. at 40% of Owned Funds)

 

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

a) 5% of its owned fund to a single party, (i.e.at 30% of Owned Funds); and

b) 10% 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 shall remain same as in Para 18 of the Directions, i.e.

a) Investment in shares of another company should not exceed 15% of its Owned Funds

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

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Author
Vinay Singh
Vinay Thakur is Managing Partner in Corpseed. He focused on payments, digital transformation, and financial technology for over 15 years and holds strong expertise on fintech startups, banking innovation, and investors with a keen understanding of the trends and activities of startups, banks, and investors in the space.