RBI Grade BNABARD ESISEBI
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Source: BS
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Context:
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a regulatory change permitting insurers to invest up to 20% of their controlled fund in debt instruments issued by public limited Special Purpose Vehicles (SPVs) operating in the infrastructure sector.
Key Highlights of the Proposal:
- Investment Scope
- Insurers may invest up to 20% of their funds in debt instruments issued by infrastructure SPVs.
- Condition: Projects must have commenced commercial operations with stabilised cash flows.
- Removal of Guarantee Requirement
- The draft circular removes the earlier requirement of a parent company guarantee, making it easier for insurers to invest.
- Use of Funds
- Proceeds must be used only for refinancing existing debt of the SPV.
- Asset Quality Criteria
- Underlying debt must be classified as standard in the lender’s records.
- Issued instruments must have a minimum AA credit rating to qualify as approved investments.
What is an SPV?
A Special Purpose Vehicle (SPV) is a legally separate entity created to carry out a specific project or purpose — often used in infrastructure, real estate, energy, road, and transport projects.
Public Limited SPV
A public limited SPV is:
- Registered as a public limited company under the Companies Act
- May raise funds from the capital markets
- Has greater financial transparency and regulatory oversight
- Operates only for a specific project or activity
