RBI Finalises NBFC Infrastructure Exposure Norms, Eases Risk Weights For High-Quality Projects

New Delhi, Jan 2 (KNN) The Reserve Bank of India (RBI) has finalised amendments to its regulatory framework governing infrastructure exposures of non-banking financial companies (NBFCs), after reviewing stakeholder feedback on the draft Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Amendment Directions, 2025, issued on October 24 last year.

The amendments are aimed at aligning risk weights more closely with the actual risk characteristics of operational infrastructure projects, with the objective of improving risk assessment and capital allocation. 

The RBI said the feedback received on the draft framework has been examined and appropriate modifications have been incorporated in the final directions.

Two Sets of Final Directions Issued

The changes have been notified through two separate instruments: the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026, and the Reserve Bank of India (Non-Banking Financial Companies – Concentration Risk Management) Amendment Directions, 2026.

Criteria for High-Quality Infrastructure Projects

Under the revised framework, the RBI has refined the definition of ‘high-quality infrastructure projects’. Stakeholders had suggested widening the scope to include projects backed by state governments, better-rated private entities, and user-fee-based models such as build-operate-transfer (BOT) and toll-operate-transfer (TOT) roads and airports.

The central bank partially accepted these suggestions, expanding eligibility to projects where revenues arise from rights granted under concessions or contracts awarded by the central or state government, public sector entities, or statutory or regulatory bodies.

Suggestions seeking more objective definitions for terms such as ‘satisfactory operations’ and ‘sufficient financial arrangements’ were also partly accepted. The RBI clarified that ‘satisfactory operations’ would now mean operations without breach of any material covenants stipulated by lenders, while noting that overly prescriptive criteria may not be feasible.

However, proposals to dilute lender protection requirements in cases of early project termination were rejected. The RBI said termination protection clauses remain critical for safeguarding creditor interests, while retaining flexibility through illustrative examples.

Revised Repayment Thresholds for Lower Risk Weights

The RBI has retained the repayment-based framework for assigning lower risk weights to high-quality infrastructure projects, while significantly relaxing the thresholds. 

The repayment requirement for a 75 per cent risk weight has been reduced from 5 per cent to 2 per cent of the sanctioned project debt, while the threshold for a 50 per cent risk weight has been lowered from 10 per cent to 5 per cent.

The central bank also clarified that repayment thresholds in refinancing or takeout transactions will be assessed with reference to the original sanctioned project debt, with any additional debt being clubbed for this purpose.

Capital Adequacy and Transition Provisions

Under the amended capital adequacy norms, loans to high-quality infrastructure projects meeting the revised repayment criteria will attract lower risk weights. Projects that subsequently fail to meet these conditions will be subject to higher risk weights under the applicable prudential norms.

The amendments will come into force from April 1, 2026, or earlier if adopted in full by an NBFC. 

Addressing stakeholder concerns over the absence of transition arrangements, the RBI has allowed NBFCs to continue with existing risk weights for exposures that would otherwise attract higher weights under the new framework, until the next review or March 31, 2027, whichever is earlier.

Concentration Risk Management Norms

The concentration risk management amendments formally incorporate the revised definition of high-quality infrastructure projects. 

To qualify, a project must have completed at least one year of operations after achieving commercial operations, be classified as a standard asset, and provide strong contractual and structural protections for lenders.

These include escrow or trust and retention account mechanisms to ring-fence cash flows, pari passu charge over project assets, adequate mitigation in case of early termination, sufficient financial arrangements for working capital needs, and restrictions on actions that could prejudice lender interests.

The concentration risk amendments will take effect when an NBFC adopts the revised capital adequacy norms or from April 1, 2026, whichever is earlier. 

(KNN Bureau)