Ans : IDFs are investment vehicles which can be sponsored by commercial banks and NBFCs in India in which domestic/offshore institutional investors, specially insurance and pension funds can invest through units and bonds issued by the IDFs. IDFs would essentially act as vehicles for refinancing existing debt of infrastructure companies, thereby creating fresh headroom for banks to lend to fresh infrastructure projects. IDF-NBFCs would take over loans extended to infrastructure projects which are created through the Public Private Partnership (PPP) route and have successfully completed one year of commercial production. Such take-over of loans from banks would be covered by a Tripartite Agreement between the IDF, Concessionaire and the Project Authority for ensuring a compulsory buyout with termination payment in the event of default in repayment by the Concessionaire.

Ans : Infrastructure Debt Funds (IDFs), can be set up either as a Trust or as a Company. A trust based IDF would normally be a Mutual Fund (MF), regulated by SEBI, while a company based IDF would normally be a NBFC regulated by the Reserve Bank.

Ans : IDF-MFs can be sponsored by banks and NBFCs. Only banks and Infrastructure Finance companies can sponsor IDF-NBFCs.

Ans : “Sponsorship” means an equity participation by the NBFC between 30 to 49% of the IDF.

Ans : NBFCs desirous of sponsoring IDF-MFs are required to comply with the following requirements :

• The NBFC should have a minimum Net Owned Funds (NOF) of Rs.300 crore; and Capital to Risk Weighted Assets (CRAR) of 15%;

• its net NPAs should be less than 3% of net advances;

• it should have been in existence for at least 5 years;

• it should be earning profits for the last three years and its performance should be satisfactory;

• the CRAR of the NBFC post investment in the IDF-MF should not be less than the regulatory minimum prescribed for it;

• The NBFC should continue to maintain the required level of NOF after accounting for investment in the proposed IDF and

• There should be no supervisory concerns with respect to the NBFC.

Ans : NBFC-IFC will need to meet the following conditions for sponsoring an IDF-NBFC :

• Sponsor IFCs would be allowed to contribute a maximum of 49 percent to the equity of the IDF-NBFCs with a minimum equity holding of 30 percent of the equity of IDF-NBFCs,:

• Post investment in the IDF-NBFC, the sponsor NBFC-IFC must maintain minimum CRAR and NOF prescribed for IFCs

• There are no supervisory concerns with respect to the IFC.

Ans : Yes NBFCs and NBFC-IFCs need to take prior approval from the Reserve Bank for sponsoring IDFs.

Ans : Yes, However, the exposure of sponsor NBFCs / IFCs and non-sponsor NBFCs / IFCs to the equity and debt of the IDFs would be governed by the extant credit concentration norms as given in para 18 of the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.

Tripartite Agreement is an agreement between three parties, namely, the Concessionaire (such as the project which is developing the infrastructure), the Project Authority (such as NHAII or a statutory body set up to develop infrastructure) and IDF-NBFC which binds all the parties collectively and provide, for the following :

1. Take-over of a portion of the debt of the Concessionaire availed from Senior Lenders;

2. a default by the Concessionaire, shall trigger the process for termination of the agreement between Project Authority and Concessionaire;

3. the Project Authority shall redeem the bonds issued by the Concessionaire which have been purchased by IDF-NBFC, from out of the termination payment as per the Tripartite Agreement and other Agreements referred to therein (compulsory buyout),

4. the fee payable by IDF-NBFC to the Project Authority as mutually agreed upon between the two.

Ans : The following are the entry point norms for IDF-NBFC :

• Minimum Net Owned Funds (NOF) of Rs. 300 crore;

• Capital to Risk Weighted Assets (CRAR) of 15%;

• Net NPAs less than 3% of net advances;

• It should have been in existence for at least 5 years before application:

• It should have been profitable in the last three years;

• its performance should be satisfactory and free from supervisory concerns;

• It shall have at the minimum, a credit rating grade of 'A' of CRISIL or equivalent rating issued by other accredited rating agencies such as FITCH, CARE, BRICKWORK and ICRA.