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NBFCs Physical and Social infrastructure growth plays a vital role in the growth of the Indian Economy. In recent years, investment in the infrastructure sector has augmented. Where Bank lending to the infrastructure sector or Infrastructure Debt fund has been slowing down, the private sector has entered to provide additional funding for infrastructure projects.
In India, there are four NBFC-IDFs are registered with the RBI, India Infradebt, L&T Infra Debt Fund, IDFC Infra Debt Fund, Kotak Infrastructure Debt Fund, which have grown their asset from ₹600 crores around two years ago to over ₹9,000 crores in the current fiscal.
These funds are still minute in the larger context of banks’ lending exposure to the infrastructure sector. But the RBI expanding the scope of projects that can be financed under the IDF-NBFC route.
Read More: How to Raise Fund in NBFC, Is FDI a Good Option?.
NBFCs sponsoring IDF-MFs are required to comply with the following requirements:
The Company shall make an application to RBI[1] to grant registration certificate as NBFC along with the required documents for such registration.
In addition to required documents for registration as NBFC, following additional documents shall be submitted while applying for NBFC-MFI:
The Company shall make an application to RBI to grant registration certificate as NBFC along with the required documents for such registration.
Following documents are needed for NBFC Registration and further required to applying for NBFC-IDF :
Other process remains similar to the registration of NBFC.
Infrastructure Debt Fund can be sponsored by the Banks or NBFCs in India. Infrastructure Debt Funds (IDF) can be set up either as an IDF-MFI or IDF-NBFC, which is sponsored by the Bank or NBFC or Infrastructure Finance companies NBFC. An NBFC or NBFC-IFC shall take No objection Certificate from Resave Bank of India to be the sponsor of IDFs.
The Infrastructure Debt Fund has facilitated infrastructure project to raise long-term funds at a cheaper rate. This fund offers long-term fixed-rate debt. This lowers the interest rate risk for the project and typically rating agencies give a higher rating for such projects. In India, NBFC-IDFs have attained good growth considering it as preferred route because an investor can invest only those infrastructure projects that have successfully completed one year of commercial production. Hence they do not carry construction risk. Also, the good credit rating shall require raising fund through NBFC-IDF which appeals long-term investors to invest.
Recommended Article: What are the different types of NBFC and how they differ from each other?.
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