Introduction: Infrastructure Finance Company

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 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.

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When Infrastructure Finance Company can be formed?

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

• A minimum of 75% of the total assets of the company shall deploy in infrastructure loans,
• The minimum Net Owned Funds of? 300 crores,
• 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.
• 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 of March 31, of the latest financial year.

What is an Infrastructure Loan?

An infrastructure Loan is a credit facilitate extended by NBFC’s to a borrower for the following categories which are classified as Infrastructure Loan. The term credit facilitate 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 facilitate 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 facilitate, 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:

1. In lending to

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

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

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

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

• 10% of its owned fund to a single group of parties, (i.e. at 50% of Owned funds).

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

• Investment in shares of another company should not exceed 15% of its Owned Funds
• Investment in shares of a single group of companies should not exceed 25% of its Owned Funds.