RBI allows IDF-NBFCs to raise short term capital

KOLKATA: Infrastructure debt funds such as India Infradebt and L&T Infrastructure Finance Co, which are set up under the non-banking finance company (NBFC) structure, can now raise capital for shorter tenure.

Reserve Bank of India has allowed these entities known as IDF-NBFC to issue short term bonds and commercial papers (CPs) to help them their asset liability mismatch better.

This is a major deviation from the earlier rule where these entities were allowed to raise resources through issue of bonds of minimum five year maturity.

RBI said they can now issue short term instruments to the extent of up to 10% of their total outstanding borrowings.

IDF-NBFC help banks by taking out infrastructure loans from them. These entities provide medium term loans to banks against their long-term infrastructure exposure.

Long-term infrastructure projects in the country are being financed by banks, which lack long-term resources.