The Reserve Bank of India (RBI) has relaxed risk-weight norms for infrastructure financing by non-bank financial companies, compared with its draft framework, as it released the final guidelines on Thursday.
The central bank has eased the repayment thresholds required for assigning lower risk weights to exposures to high-quality infrastructure projects, while retaining repayment-linked criteria despite calls from some stakeholders to scrap them altogether. The RBI reiterated that repayments are a critical metric to demonstrate a credible reduction in project risk.
Major capital relief: Repayment hurdles slashed for lenders
Under the final norms, NBFC exposures can now qualify for a 75% risk weight after just 2% repayment of the original sanctioned project debt, sharply lower than the 5% proposed in the draft. Similarly, the 50% risk weight will be applied once 5% of the project debt is repaid, compared with the earlier 10% threshold. The changes follow feedback on the draft amendment directions issued on October 24 under the RBI’s scale-based regulation framework for NBFCs.
Expanded scope: Redefining high-quality infrastructure projects
The RBI has also partially widened the definition of high-quality infrastructure projects, allowing those where revenues depend on rights granted under concession or contract by the central, state governments, public sector entities, or statutory and regulatory bodies. However, it retained termination protection clauses, calling them essential to safeguard lenders’ interests.
Clarifying the treatment of refinancing and takeout financing, the RBI said repayment thresholds will be assessed against the original sanctioned project debt, with any additional borrowing being clubbed to determine eligibility for lower risk weights.
The amended directions will take effect from April 1, with NBFCs permitted to adopt them earlier in full. For existing exposures, lenders may apply the revised risk weights at the next review or by March 31, 2027, whichever is earlier. The RBI said the overall impact is expected to be largely neutral or beneficial.
