What changed
RBI amended the definition of 'Infrastructure Loan' in the 2007 Prudential Norms Directions for both deposit-taking and non-deposit-taking NBFCs to include 'Telecom Towers' as an infrastructure facility. Additionally, the requirement for credit rating agencies for Infrastructure Finance Companies was clarified: only RBI-approved credit rating agencies can assign ratings, replacing the earlier phrase 'accredited CRAs' with 'credit rating agency accredited by RBI'. Also, for deposit-taking NBFCs, the sub-clause 'construction of educational institutions and hospitals' was omitted from the infrastructure definition.
What it means for you
NBFCs can now classify loans for telecom towers as infrastructure loans, potentially benefiting from preferential treatment under prudential norms. The clarification on credit rating agencies ensures that only RBI-approved agencies can rate IFCs, tightening the oversight on rating validity for these companies.
What you must do
- Update internal loan classification systems to include telecom towers under infrastructure loans.
- Review existing telecom tower loan portfolios to reclassify them as infrastructure loans if eligible.
- Ensure that any credit rating used for IFC classification is from an RBI-accredited agency.
- Train credit and compliance teams on the revised definition and rating requirements.
Who it affects
All NBFCs (deposit-taking and non-deposit-taking), Infrastructure Finance Companies (IFCs), Credit rating agencies operating in India
Does this circular apply to banks directly?
No, this circular is addressed to all NBFCs. However, banks that lend to NBFCs for telecom infrastructure may see changes in how those loans are classified by the NBFC.
When did this change take effect?
The amendment was issued on March 16, 2011, and came into effect immediately from that date.
What is the significance of the credit rating agency change?
It clarifies that only RBI-accredited credit rating agencies can rate Infrastructure Finance Companies, ensuring consistency and regulatory oversight in the rating process.