In a move that could give greater flexibility to infrastructure debt funds (IDF), the Reserve Bank of India (RBI) has allowed IDFs sponsored by non-banking finance companies (NBFCs) to raise money through short-term bonds, including commercial papers.
So far NBFC-run IDFs were allowed to raise funds only through bonds having a minimum tenure of five years.
“On a review, with a view to facilitate better AUM (assets under management) it has been decided in consultation with the government of India to allow IDF-NBFCs to raise funds through shorter tenor bonds and commercial papers from the domestic market to the extent of up to 10% of their total outstanding borrowings,” the RBI said in a circular on Thursday.
According to rating agency Crisil Ltd, the move could bring down cost of borrowing for IDFs.
“This will enable them to better plan for their upcoming disbursements or debt repayments. In the current environment, it also provides them an opportunity to benefit from prevailing lower short-term interest rates,” said Pawan Agrawal, chief analytical officer at Crisil.
“At the same time, the limit on such shorter tenure borrowings to just 10% of total borrowings is unlikely to alter the fundamental strength of a matched asset liability profile, which is critical for the credit quality of IDF-NBFCs. Further, Crisil-rated IDF-NBFCs maintain sufficient liquidity at all times to cover upcoming debt maturities well in advance,” he said in an e-mail response.
