RBI Clarifies NaBFID Participation in Financial Markets as an AIFI

The Reserve Bank of India (RBI) has issued Circular RBI/2024-25/101, clarifying that the National Bank for Financing Infrastructure and Development (NaBFID) is permitted to participate as an All-India Financial Institution (AIFI) in financial markets by updating the master directions on credit derivatives and directions on repo transactions.

The circular is clarificatory in nature since NaBFID was regulated and supervised as AIFIs by the RBI since March, 2022 and AIFIs could undertake the credit default swap and repo transactions according to the master direction on prudential regulation on Basel III capital framework for AIFI and the previous cited directions as amended from time to time.

Thus, the RBI has clarified NaBFID’s eligibility to:

• Act as a market maker for credit derivatives, enabling it to facilitate hedging and risk management in the credit markets.
• Undertake repo transactions, bolstering its liquidity management and funding capabilities.

Industry experts see the move as a significant step in expanding the operational reach of AIFIs, particularly in infrastructure financing.