‘Infrastructure Finance Company’

Infrastructure finance companies are specialized financial institutions that provide loans for infrastructure projects. These companies do not accept deposits like traditional banks but focus solely on lending to infrastructure projects such as roads, bridges, airports, and renewable energy projects. In this article, we will take a closer look at infrastructure finance companies, their requirements, and the recent granting of the infrastructure finance company status to the Indian Renewable Energy Development Agency (IREDA).

Requirements for Infrastructure Finance Companies

To be classified as an infrastructure finance company in India, the company must meet certain requirements set by the Reserve Bank of India (RBI). Firstly, at least 75% of the total assets of the company must be deployed as infrastructure loans. This means that the company must primarily focus on lending to infrastructure projects and not other types of loans. Secondly, the company must have a minimum net worth of Rs.300 crores, which is a measure of the company’s financial strength. Thirdly, the company must have a Capital to Risk-Weighted Assets Ratio (CRAR) of 15%, with Tier I capital at 10%. This indicates the company’s ability to absorb losses and remain financially stable. Finally, the company must have a minimum credit rating of A from recognized rating agencies such as CRISIL.

Grants of Infrastructure Finance Company Status

The RBI has recently granted infrastructure finance company status to the Indian Renewable Energy Development Agency (IREDA), which was earlier classified as an Investment and Credit Company (ICC). The IFC status allows IREDA to take higher exposure to renewable energy financing. This move is aimed at promoting renewable energy projects in India and achieving the government’s target of 450 gigawatts of renewable energy by 2030.

Impact of Infrastructure Finance Companies

Infrastructure finance companies play a crucial role in financing infrastructure projects in India. These projects require significant amounts of capital, and traditional banks may not have the expertise or the risk appetite to lend to these projects. Infrastructure finance companies have specialized knowledge in evaluating and financing infrastructure projects, making them an ideal source of funding for these projects.