NBFC

RBI Tightens Large Exposure Rules for Infrastructure Debt Fund NBFCs

The RBI has brought a change in the concentration of risk norms for NBFCs involved in infrastructure finance. The Reserve Bank of India (Non-Banking Financial Companies -Concentration Risk Management) Fourth Amendment Directions, 2026, have prescribed new exposure requirements for Infrastructure Debt Fund–NBFCs, or IDF-NBFCs, in the Upper Layer.

These IDF-NBFCs will have to follow the large exposure limits applicable to Upper Layer NBFC-Infrastructure Finance Companies (NBFC-IFCs). This change has come into effect with immediate effect. This helps to reduce over-reliance on any single borrower or connected group and control the financial risk of infrastructure lenders. If you are looking for NBFC registration or already have a registered NBFC, this write-up is for you.

What Has RBI Changed?

RBI has added paragraph 39A under Chapter IV to its concentration-risk framework. This new provision will make the same large-exposure limits applicable to Upper Layer IDF-NBFCs as are already in force for Upper Layer NBFCs-IFCs. A more uniform regulatory approach to concentration risk will apply to two types of NBFCs involved in infrastructure lending.

However, this amendment does not create a new exposure framework for all IDF-NBFCs or all NBFCs. The rule applies to IDF-NBFCs in the upper layer under the RBI’s scale-based regulatory framework.

The new regime has fixed capital-linked limits for a single counterparty and a group of connected counterparties.

Key Regulatory Change

Particular	Revised position for Upper Layer IDF-NBFCs
Single counterparty exposure	30% of eligible capital base
Group of connected counterparties	45% of eligible capital base
Regulatory alignment	Same limits applicable to Upper Layer NBFC-IFCs
Effective date	Immediate

Understanding Large-Exposure Rules for Infrastructure Debt FUND NBFCs

Large-exposure rules control how much exposure a lender can have to a borrower or connected borrower group. If an NBFC has too much money stuck with a borrower, it can have a big impact on the financial position of the defaulting lender of the borrower. So, RBI sets exposure limits for single borrowers and connected counterparties.

The key points are:

• Limit exposure to a single borrower.
• Calculate the total exposure of connected counterparties.
• If there are multiple entities in the same group, consider their relationships.
• Reduce potential financial losses due to excessive concentration.
• Do not measure exposure by looking at individual legal entities alone.

So, concentration risk is not just a matter of a single loan account. The entire borrower relationship needs to be looked at.

Why Are Upper-Layer IDF-NBFCs Covered?

IDF-NBFCs are an important means of long-term debt financing for the infrastructure sector. They provide financing for infrastructure projects and play an important role in refinancing existing infrastructure debt. This type of lending involves large amounts of money and long repayment periods.

This can create certain risks-

• Large-ticket lending is used in infrastructure projects.
• The lender is dependent on project cash flow.
• Multiple exposures can be created with the infrastructure sponsor.
• There can be lending to different project companies in the same group.
• Long-term funding often results in longer-term risks.

RBI imposes more prudential requirements on upper-layer NBFCs, as their size, activities, and risk profile may be more important to the financial system.

Upper-layer IDF-NBFCs have been brought under the same large-exposure framework as NBFC-IFCs. This will enable more control of the concentration risk of infrastructure lenders.

The Reason for Introducing the RBI’s Change

The RBI brings this change to better control the concentration risk of infrastructure-focused NBFCs. The exposure of upper-layer IDF-NBFCs can be large. So, it is important to reduce excessive dependence on a borrower or group.

Preventing Excessive Borrower Concentration

If there is too much exposure to a borrower or connected group, the impact of default can be very high on the NBFC. Exposure limits help reduce this risk.

Harmonizing Infrastructure-Lending Rules

The nature of work of upper-layer IDF-NBFCs and NBFC-IFCs is largely infrastructure-focused. Hence, a more consistent approach has been adopted in large-exposure rules for them.

Strengthening Systemic-Risk Management

The size and activities of Upper Layer entities can have a greater impact on the financial system. Hence, stronger prudential controls are required for them.

Improving Risk Governance

It is not enough to look at individual loan accounts alone. The total exposure of the borrower, sponsor, and connected group should also be looked at. This will help to understand concentration risk in advance.

What the New Rules Mean for Infrastructure Finance?

The new rules aim to ensure that upper-layer IDF-NBFCs remain within the limits of concentration risk while financing large infrastructure projects. So, lenders will have to verify the borrower and its connected entities before taking large exposure.

Some important changes may be seen in infrastructure lenders:

• There will be more scrutiny on large infrastructure exposure.
• Connected counterparties will have to be checked before additional financing.
• Large exposure may need to be divided among multiple lenders.
• Syndication and risk-sharing arrangements may increase in importance.
• Portfolio diversification should be a focus.
• Capital allocation can be more disciplined.

Compliance Requirements for Upper Layer IDF-NBFCs

After the new rules come into effect, upper-layer IDF-NBFCs will not only need to update their policies. Existing exposure, borrower relationships, and monitoring processes also need to be reviewed. It is important to identify the exposure of connected entities.

Exposure Mapping

First, the NBFC needs to create a clear picture of its relevant exposures. This may include:

• Loans and advances
• Investments
• Guarantees
• Undrawn commitments
• Refinancing arrangements
• Other applicable eligible exposures

This will help the lender understand the total exposure to a borrower or group.

Connected-Counterparty Identification

If different entities in the same group have different legal names, there may be connections between them. Therefore, during the review, you should look at:

• Parent and subsidiary entities
• Joint ventures and associates
• Common promoters
• Common ownership or control
• Related entities
• Other recognized connected relationships

Limit Monitoring

The monitoring system should track exposure regularly. You should look at:

• Single-counterparty exposure
• Connected-group exposure
• Current exposure
• Applicable contingent or undrawn exposures
• Exposure relative to eligible capital

A limit impact check is required before granting a new loan or additional facility.

Board-Level Reporting

The board and risk committee should be provided with important concentration data regularly. The report may include:

• Top exposures
• Connected-group exposure
• Limit utilisation
• Near-limit positions
• Concentration trends
• Breaches and corrective measures

This will enable management to take necessary corrective action promptly.

Large-Exposure Limits and Capital Adequacy

Large-exposure limits and capital adequacy are both important prudential requirements of RBI. However, large-exposure rules prevent excessive exposure to a borrower or connected group. On the other hand, capital adequacy looks at whether the NBFC has sufficient capital compared to its risk-weighted assets.

In case of Upper Layer NBFCs, as per the provided framework, a minimum CRAR of 15%, Tier 1 capital of 10% and CET1 capital of 9% have to be maintained. However, meeting these capital ratios does not mean that large-exposure rules have been complied with.

Area	Purpose
Large-exposure limits	Restrict excessive concentration with one counterparty or connected group
Capital adequacy	Ensure sufficient capital against risk-weighted assets
Eligible capital base	Determines the applicable exposure ceiling
Risk-weighted assets	Used for assessing capital adequacy

So, the two types of requirements need to be monitored separately.

Interaction with Infrastructure Risk Weights

In the case of infrastructure lending, risk weight and large-exposure limit are two different things. If the risk of weight exposure is lower, the required capital charge may decrease. But this does not mean that exposure will go beyond the concentration limit.

So:

• Risk weight determines how much capital is required for exposure.
• Large exposure limit controls the concentration of the borrower or connected group.
• Exposure limit may still be applicable even when there is a lower applicable risk of weight.

Both capital requirements and exposure of ceilings should be considered during lending decisions. It is important to adhere to these two frameworks together.

Strategic Impact on IDF-NBFCs

The new rules may also bring some changes in the lending strategy of IDF-NBFCs. In the case of large infrastructure financing, the existing exposure of the sponsor and the connected group should be calculated. So, lenders will need to strike a good balance between growth and concentration risk.

Possible strategic changes include:

• Increasing the use of syndicated or shared lending.
• Monitoring sponsor-level exposure more regularly.
• Diversifying portfolios across infrastructure segments.
• Making credit underwriting more disciplined.
• Looking at group-level exposure in addition to project-level.
• Considering the use of permitted risk transfer mechanisms.
• This will require a more planned approach to managing large transactions.

Key Compliance Checklist for IDF-NBFCs

The compliance team of IDF-NBFCs should regularly review some key areas to ensure alignment with the new framework. The following checklist can facilitate that review process-

Compliance area	What should be reviewed?
Regulatory classification	Confirm Upper Layer status
Exposure limits	Apply applicable single and group limits
Capital base	Verify eligible capital calculation
Borrower mapping	Identify all relevant counterparties
Connected entities	Review ownership, control and relationships
Systems	Update exposure-monitoring mechanisms
Governance	Strengthen board/risk committee reporting
Credit approvals	Check exposure impact before sanction

How Can Enterslice Help with Compliance?

Understanding the revised concentration-risk framework of the RBI and aligning internal processes with its importance for IDF-NBFCs. Enterslice can provide regulatory compliance and risk-governance support.

Our Services:

• Reviewing whether the entity falls under the Upper Layer or not.
• Assessing existing exposures against applicable limits.
• Support in borrower and connected-counterparty mapping.
• Review of concentration-risk policies and internal controls.
• Assist in preparation of NBFC compliance documentation and reporting framework.
• Support in updating internal policies and monitoring mechanisms.
• Identify potential compliance gaps and guide corrective measures.

So, management will be able to understand where the existing lending, monitoring, and governance processes match the revised requirements.

To Wrap Up

RBI amendment is an important prudential step in controlling the concentration risk of upper-layer IDF-NBFCs. These entities will have to follow the applicable large-exposure limits of upper-layer NBFC-IFCs, and the rule has come into effect immediately.

Now, it is necessary to monitor the exposure of a single counterparty and connected group more carefully. Attention will also be paid to eligible capital, internal controls, credit approval, and board-level reporting. It aims to reduce infrastructure financing. Rather, it manages large lending so that excessive concentration does not create pressure on the financial stability of any one NBFC.

Enterslice can help affected IDF-NBFCs understand the revised requirements, review the existing framework, and strengthen ongoing regulatory compliance. So, get in touch with us today for hassle-free compliance.

Answers to Common Questions About Infrastructure Debt Fund NBFCs