Source: FE
Context:
The Reserve Bank of India (RBI) has eased risk-weight norms for infrastructure lending by Non-Banking Financial Companies (NBFCs), compared with its draft framework, while issuing the final guidelines on Thursday. The move provides capital relief to lenders while retaining repayment-based safeguards to ensure prudence.
What is the change?
RBI has lowered the repayment thresholds required for NBFC exposures to qualify for reduced risk weights for high-quality infrastructure projects, though it has retained repayment-linked criteria, underscoring that repayments remain a key indicator of reduced project risk.
Major Capital Relief: Key Changes
| Risk Weight | Draft Norm | Final Norm |
|---|---|---|
| 75% | After 5% repayment of original project debt | After 2% repayment |
| 50% | After 10% repayment | After 5% repayment |
- Applies to original sanctioned project debt
- Any additional borrowing will be clubbed to assess eligibility
Expanded Scope: High-Quality Infrastructure Projects
RBI has partially widened the definition of high-quality infrastructure projects to include those where revenues depend on rights granted under concession or contract by:
- Central or State Governments
- Public sector entities
- Statutory or regulatory bodies
However, termination protection clauses have been retained, as RBI considers them essential to safeguard lenders’ interests.
