RBI to introduce principle-based framework for NBFCs to rationalise risk weights on operational infrastructure projects

Reserve Bank of India

The Reserve Bank of India (RBI) on October 1 proposed to introduce a principle-based framework for non-banking finance companies to further rationalise the risk weights for infrastructure lending in line with the nuanced risk-profile of operational projects.

The central bank said the framework aims to align risk weights with the actual risk characteristics of operational infrastructure projects, promoting better risk assessment and capital allocation.

“To reduce the cost of infrastructure financing by NBFCs, it is proposed to reduce the risk weights applicable to lending by NBFCs to operational, high quality infrastructure projects,” RBI Governor Sanjay Malhotra said while announcing the monetary policy.

The RBI will issue draft regulations shortly for public consultation.

“The principle-based framework proposed by RBI for infrastructure lending is a welcome step, as it clarifies risk weights for operational projects and supports sound, long-term lending practices — enabling NBFCs like ours to further contribute to nation-building,” said Umesh Revankar, Executive Vice Chairman at Shriram Finance.

The RBI’s Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 5.5 percent on October 1, second time in a row.

The MPC also kept the stance unchanged to 'Neutral'.

The MPC considered it prudent to wait for impact of policy actions to play our before charting the next policy action.

As a result, the standing deposit facility (SDF) rate remains unchanged at 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.75 per cent.

The decision was in line with Moneycontrol’s poll of economists and bankers who predicted the RBI’s Monetary Policy Committee (MPC) will hold rates due to comfort from the higher growth in the first quarter while taking time to assess the data on the Goods and Services Tax (GST) reforms.