The Reserve Bank of India has decided to allow eligible non-resident investors to invest, on a repatriation basis, in rupee and foreign currency denominated bonds issued by the Infrastructure Debt Funds (IDFs) set up as non-banking financial companies.
Further, eligible non-resident investors can invest, on a repatriation basis, in rupee denominated bonds issued by IDFs which are set up as domestic mutual funds (MFs), the RBI said in its guidelines on foreign investments in IDFs.
Eligible investors in the IDFs include sovereign wealth funds, multilateral agencies, pension funds, insurance funds and endowment funds (all SEBI-registered eligible non- resident investors); foreign institutional investors; non-resident Indians; and high networth individuals. All SEBI-registered eligible non- resident investors, SEBI-registered FIIs and HNIs can invest in foreign currency and rupee denominated bonds and rupee denominated units issued by IDFs. NRIs, however, can invest only in rupee denominated bonds and units issued by IDFs. The original / initial maturity of all bonds at the time of first investment by a non-resident investor will be five years.
Quantitative limits
All non-resident investment in IDFs (other than non-resident Indians) in both rupee and foreign currency denominated securities would be within an overall cap/limit of $10 billion only. This cap/limit would be within the overall cap of $25 billion for FII investment in bonds/non-convertible debentures issued by Indian companies in the infrastructure sector or by infrastructure finance companies (IFCs registered as NBFCs with the RBI).
There would be no cap / limit for NRI investment in IDFs by way of rupee denominated bonds / units.
End-use
IDFs set up as NBFCs can invest in debt securities of only public private partnership (PPP) infrastructure projects which have a buyout guarantee and have completed at least one year of commercial operations. Refinance by IDF would be up to 85 per cent of the total debt covered by the concession agreement.
IDFs set up as MFs would invest minimum of 90 per cent of its funds in debt securities of infrastructure companies or special purpose vehicles across all infrastructure sectors, project stages and project types.