RBI Expands Infrastructure Lending Definition for NBFCs

What changed

The RBI amended the NBFC Prudential Norms Directions, 2007 to include two new sub-sectors in the Harmonised Master List of Infrastructure sub-sectors: hotels with project cost exceeding ₹200 crore (any star rating, any location in India) and convention centres with project cost exceeding ₹300 crore. This change follows a Government of India gazette notification dated October 7, 2013, and applies prospectively from the circular date for eligible projects for a three-year period.

What it means for you

NBFCs can now classify loans for these large-scale hospitality and convention projects as 'infrastructure lending', which typically attracts preferential treatment under prudential norms (e.g., lower risk weights, longer repayment periods). This expands the scope of infrastructure financing, potentially boosting credit flow to these sectors. NBFCs must update their internal classification systems to reflect the revised definition and ensure compliance with the amended directions.

What banks were required to do at the time

• Update internal credit policies to include hotels (project cost >₹200 crore) and convention centres (>₹300 crore) as eligible infrastructure sub-sectors.
• Ensure that for these new sub-sectors, project cost excludes land and lease charges but includes interest during construction, and the classification applies only for projects initiated within three years from November 29, 2013.
• Review existing loan portfolios to identify any exposures that may now qualify as infrastructure lending and reclassify them accordingly.
• Train credit and risk teams on the updated definition and the specific eligibility criteria (cost thresholds, exclusion of land cost).

Who it affects

All NBFCs engaged in infrastructure lending, Borrowers in hospitality and convention centre sectors