The Cabinet Committee on Economic Affairs (CCEA) has taken the following steps to promote the operationalisation of Infrastructure Debt Funds (IDFs).
- The annual Guarantee Fee payable to the Concession Authority has been capped at 0.05% per annum, of outstanding debt financed by the IDF NBFCs (Non Banking Financial Companies) for the first 3 years of operation of the IDF NBFC.
- IDFs will be given the status of Public Financial Institutions (PFI). Infrastructure Debt Funds are allowed to file Shelf Prospectus under Section 60 A of the Companies Act, 1956 and access to provisions of the SARFAESI Act, including to the adjudicatory process through Debt Recovery Tribunals.
- Post-successful COD PPP (Commercial Operation Declaration) projects shall now be eligible for investment by Insurance Companies, Provident Funds (PFs), EPFO, Mutual Funds (MFs), etc.
What are Infrastructure Debt Funds (IDF)?
As per Reserve Bank of India, 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 space 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 1 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.
What legal forms can IDF be set up as and who will be the regulators?
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.
Do the NBFCs/IFCs need prior permission from Reserve Bank for sponsoring IDFs?
Yes NBFCs and NBFC-IFCs need to take prior approval from the Reserve Bank for sponsoring IDFs.
How do IDF- NBFCs and IDF-MFs (Mutual Funds) raise resources?
IDF-NBFCs will raise resources through issue of either Rupee or Dollar denominated bonds of minimum 5 year maturity. IDF-MFs will raise resources through issue of units of MFs.
What does “sponsorship” mean?
“Sponsorship” means equity participation by the NBFC between 30 to 49% of the IDF.
Who can invest in the bonds of IDF-NBFCs and Units of IDF-MFs?
Domestic/offshore institutional investors, especially insurance and pension funds can invest through units and bonds issued by the IDFs.