The Reserve Bank of India amended the NBFC Concentration Risk Management Directions, introducing a new category of "high-quality infrastructure projects" that allows Non-Banking Financial Companies to take higher single-borrower exposure to qualifying infrastructure loans. The amended directions, effective April 1, 2026, were issued alongside corresponding amendments to the NBFC capital adequacy norms, easing risk weights for eligible infrastructure exposures.
Background
India's infrastructure investment pipeline — spanning roads, ports, power, telecom, and urban infrastructure — relies significantly on NBFC financing, particularly for projects where commercial bank lending appetite is limited. However, the existing NBFC concentration risk framework, which caps single-borrower exposure as a percentage of owned funds, constrained NBFCs' ability to finance large infrastructure projects without breaching prudential limits.
The RBI had issued draft amendment directions for public consultation, receiving representations from infrastructure NBFCs, industry bodies, and the IBBI requesting a differentiated framework for high-quality infrastructure lending. The final amendment incorporates a risk-based classification that allows enhanced exposure to projects meeting defined quality criteria.
Key Provisions
The amended directions establish the following framework:
High-quality infrastructure definition: Infrastructure lending qualifies as "high-quality" where the project has completed at least one year of operations after commercial commencement without any breach of material covenants, and the exposure is classified as standard.
Government-backed revenue stream: Project revenues must arise from concession or contractual rights granted by the Central or State Government, public sector entities, or statutory/regulatory bodies, with protection throughout the concession period.
Strong lender protection: The contractual framework must include escrow or Trust and Retention Account (TRA) mechanisms, pari-passu charge over project assets, and adequate termination risk mitigation, ensuring that the NBFC's exposure is secured through multiple enforcement mechanisms.
Eased risk weights: Corresponding amendments to the RBI's capital adequacy directions for NBFCs reduce risk weights for exposures classified as high-quality infrastructure, lowering the capital charge and enabling more efficient deployment of NBFC capital.
Implications for Practitioners
Infrastructure NBFCs such as Power Finance Corporation, REC, IRFC, and private sector infrastructure lenders stand to benefit materially from these amendments. The enhanced exposure limits allow them to participate in larger project financings without requiring syndication partners solely to manage concentration risk limits.
Legal counsel advising NBFCs on infrastructure lending must build the "high-quality" qualification criteria into their credit approval processes. Loan documentation should incorporate specific covenants that track the qualification criteria — particularly the one-year operational track record, standard classification maintenance, and government-backed revenue conditions — to ensure ongoing compliance.
For project developers, the amendments improve access to NBFC financing for qualifying projects. Developers of government concession-based projects, including PPP infrastructure, should highlight their qualification against the RBI criteria when approaching NBFC lenders.
Frequently Asked Questions
Do existing infrastructure loans automatically qualify for the enhanced exposure limits?
Existing infrastructure exposures must be individually assessed against the qualification criteria. Loans to projects that have completed one year of post-commencement operations, maintain standard classification, and satisfy the government-backed revenue and lender protection conditions may be reclassified under the new framework. NBFCs must maintain documentation evidencing compliance with each criterion.
Is the high-quality infrastructure classification permanent or subject to review?
The classification is conditional and ongoing. If a qualifying project subsequently breaches material covenants, the exposure is downgraded from standard, or the government-backed revenue protection lapses, the exposure loses its high-quality status and reverts to standard concentration risk treatment. NBFCs must monitor qualification criteria on a continuing basis.