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Infrastructure Debt Fund Non-Banking Financial Companies

Definition: The Infrastructure Debt Fund Non-Banking Financial Companies or IDF-NBFC are yet another non-deposit accepting financial institutions that purely deals in infusing long-term debt into the infrastructure sector. The debt fund means a pool of investment that holds the array fixed-income instruments such as bonds or debentures.

As per RBI, the company shall be recognized as an IDF only if it satisfies the following conditions:

  • A company must be a non-deposit accepting firm with a net owned fund of Rs 300 crore and more.
  • It must invest only in the PPP (public-private partnerships) and infrastructure projects with post-commencement operations date (COD) which have satisfactorily completed a minimum one year of commercial operations and becomes the party to the tripartite agreement.
  • The IDF-NBFC must have a minimum credit rating of “A” of Crisil or equivalent to any other accredited rating agencies.
  • The company should have a minimum CRAR (Capital risk weighted asset ratio) at 15%, and Tier-II Capital should not exceed the Tier-I capital.

The IDF can be a trust or a company if it is set up as a trust, then It would be a mutual fund and shall be regulated by the Securities Exchange Board of India (SEBI). Such funds will be called as IDF-MF and will issue the rupee denominated units with at least five years of maturity.

If the IDF is set up as a company, then it will be treated as a Non-Banking Financial Company and shall be regulated by RBI.

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