The RBI has eased prudential norms on capital adequacy for non-banking finance companies (NBFCs) giving loans to high-quality infrastructure projects, even as it has offered high degree of protection to the lenders under new amendment directions.
The amendment directions are aimed primarily at aligning risk weights with the actual risk characteristics of operational infrastructure projects, thereby promoting better risk assessment and capital allocation, said the RBI.
Under the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026, loans extended by NBFCs to ‘high-quality infrastructure projects’, where the borrower has repaid at least 2 per cent of the sanctioned project debt, will attract 75 per cent risk-weight.
draft guidelines
In the draft guidelines, the repayment threshold for attracting 75 per cent risk-weight was set higher – the obligor had to repay at least 5 per cent but less than 10 per cent of the sanctioned amount.
Risk-weight decides the amount of capital a lender has to set aside for making a loan. Higher the risk-weight, more capital a lender has to set aside. Further, loans extended by NBFCs to high-quality infrastructure projects, where the borrower has repaid at least 5 per cent of the sanctioned project debt, will attract 50 per cent risk-weight.
In the draft guidelines, the repayment threshold for attracting 50 per cent risk-weight was set higher – the obligor had to repay at least 10 per cent of the sanctioned amount.
The RBI said infrastructure projects will be considered of high-quality if they meet criteria, such as the project completing at least one year of operations post achievement of the date of completion of commercial operations, without breach of any material covenants stipulated by the lender, and the exposure is classified as ‘standard’ in their books.
Further, the borrower’s revenue should depend on rights granted under concession / contract by the Central government, a State government, a public sector entity, or a statutory or regulatory body, and the contractual provisions provide for protection of these rights for the entire period of concession/ contract as long as the borrower fulfils its obligations under the contract.
Another stipulation for considering a project as high-quality is that the concession / contractual provisions provide for a high degree of protection for a lender.
This shall, at a minimum, include: (i) provisions of an escrow / trust and retention account mechanism for ringfencing the cash flows; (ii) pari-passu charge in favour of the lender over all movable and immovable assets; and (iii) mitigation of risk for lenders in case of early termination (step-in rights for the lenders, minimum termination payments).
The borrower needs to have sufficient internal or external financial arrangements to cover current and future working capital and other funding requirements of the project as per the assessment of the lender.
The borrower is also restricted from acting to the detriment of the lender – for example, it is restricted from issuing additional debt against or further encumbering the cashflows and assets of the project without consent of the existing lenders.
The RBI said the Amendment Directions will be applicable from April 1, 2026, or from an earlier date when these directions are adopted by a NBFC in entirety.
Published on January 1, 2026
