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NBFCs for core sector

Mumbai, Feb. 12: The Reserve Bank of India (RBI) today notified a new category of non-banking finance companies called infrastructure finance companies

At present, there are three categories of NBFCs: asset finance companies, loan companies and investment companies.

NBFCs engaged mainly in infrastructure financing had long been demanding a separate status that would acknowledge the role played by them in providing credit to infrastructure firms.

In its second-quarter review of its policies in October, the central bank had announced the creation of infrastructure NBFCs who are those which deploy a minimum of 75 per cent of their assets in infrastructure loans.

The Reserve Bank further said an infrastructure finance company should have minimum net owned funds of Rs 300 crore and the rating agencies — Crisil, Fitch, Care and Icra — should have provided “A” or an equivalent rating to it. The “A” rating is two notches below the highest rating.

The NBFCs should have a capital adequacy ratio of 15 per cent, which is the percentage amount of capital kept for various kinds of risks. The RBI, in another notification, linked the risk weight of a banks’ exposure to the infrastructure NBFCs to their ratings from external credit agencies.

To encourage a larger flow of funds into infrastructure, the RBI also said that the exposure of a bank to these NBFCs had been enhanced to 20 per cent of its capital funds from 15 per cent.

The Planning Commission had set an investment target of $500 billion in infrastructure during the Eleventh Five Year Plan (2007-12). Meanwhile, RBI governor D. Subbarao today said growing fiscal deficit as a result of the governments’ efforts to prop up their economies had potential to undermine the autonomy of central banks.

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