RBI proposes lower risk weight on NBFCs’ infra loans

The Reserve Bank of India (RBI) has introduced draft regulations to facilitate infrastructure financing through non-banking financial companies (NBFCs) by adjusting risk weight requirements for qualifying projects. Under the proposed framework, lenders would apply reduced risk weights to high-quality infrastructure exposures based on repayment progress.

Projects demonstrating repayment of at least 10% of the sanctioned loan amount would qualify for a 50% risk weight allocation. Loans where borrowers have repaid between 5% and 10% would carry a 75% risk weight, down from the standard 100% requirement.

Projects initially classified as high-quality infrastructure that later fail to maintain eligibility criteria would revert to 100% risk weighting. The central bank has invited stakeholder comments on these proposals through November 21, 2025, with implementation scheduled for April 1, 2026, or earlier adoption by NBFCs.

To earn high-quality infrastructure designation, projects must meet multiple criteria: successful operation for at least one year post-commissioning, maintenance of standard asset classification, reliance on a primary counterparty (specifically central government or public sector entities), and legally enforceable payment mechanisms. Contractual safeguards must include creditor protection features such as cash flow escrow arrangements, first lien on project assets, and termination compensation clauses.

Additionally, borrowers must demonstrate operational financial stability through internal resources or external arrangements to meet working capital needs. Project agreements must restrict debt issuance against existing cash flows or assets without creditor consent, preventing actions that could undermine lender security.

Published on October 24, 2025