RBI’s New Infrastructure Lending Rules Put NBFCs in a Fix
The Reserve Bank of India’s draft guidelines for infrastructure lending risk weights have created significant challenges for non-banking financial companies (NBFCs), who find the proposed framework more complex and difficult to implement than current regulations.
Key Changes in Risk Weight Structure
The draft introduces a split risk weight structure of 50% and 75% for high-quality infrastructure projects, replacing the existing flat 50% rate for commissioned projects with over a year of commercial operations. Lenders say the new criteria—based on repayment levels and other conditions—add unnecessary complexity to the current framework. The guidelines are scheduled to take effect from April 1.
Industry Reactions and Concerns
Power Finance Corporation (PFC) is reviewing the draft’s impact across its extensive loan book spanning generation, transmission, and distribution sectors.
“Unlike the current simplified framework, this draft introduces a more detailed approach to classify projects as high-quality infrastructure assets,” said Parminder Chopra, chairman and managing director of PFC.
“The draft is restrictive and confusing in terms of implementation. We’ll be suggesting RBI adopt a bank-like model that links provisioning to credit ratings,” stated Virender Pandey, MD of Aseem Infrastructure Finance.
The Finance Industry Development Council (FIDC) is gathering member feedback before making a formal representation to the central bank.
Analyst Perspectives
Analysts view the RBI’s move as timely and aligned with broader policy goals of improving credit flow to infrastructure.
“The shift from the earlier PPP/post-COD requirement to a more nuanced classification based on financial soundness, cash flow visibility and counterparty risk is a positive step,” said A M Karthik, Senior Vice President & Co-Group Head, Financial Sector Ratings at ICRA. “It should especially benefit renewable energy projects, which typically have shorter gestation periods.”
However, Karthik noted that while lowering risk weights improves capital buffers, most infrastructure finance companies already maintain adequate capitalisation. He added that growth in this segment has remained moderate at 10-12%, making the real impact on lending appetite uncertain.
Upper-layer NBFCs have limited exposure to infrastructure, with some having exited the segment in recent years. While NBFC-IFCs could see improved appetite, non-IFCs are unlikely to make strategic shifts immediately.
Implementation Outlook
Most projects with COD+1 status—excluding captive power and recently restructured assets—are expected to meet the RBI’s definition of ‘high quality’. The industry now awaits further clarity on implementation details and final guidelines before recalibrating their portfolio strategies.
