RBI Proposes New Infrastructure Risk Weights for NBFCs

The Reserve Bank of India (RBI) has proposed significant amendments to its Master Direction on Reserve Bank of India (Non-Banking Financial Company-Scale Based Regulation) Directions, 2023, seeking to recalibrate risk weights applicable to infrastructure exposures of Non-Banking Financial Companies (NBFCs). The draft Reserve Bank of India (NBFC-Scale Based Regulations) Amendment Directions, 2025 (the “Draft Amendment”) issued through the Circular bearing Reference No. RBI/2025-26/D.O.R.CRE.REC/03/.10.001/202526 dated October 24, 2025, marks another stride in aligning prudential norms with India’s evolving infrastructure financing ecosystem. The move aims to promote capital efficiency and incentivize lending to well-structured, stable infrastructure projects.

NBFCs have increasingly become key financiers in India’s infrastructure landscape, complementing traditional banks in long-gestation sectors such as roads, energy, and urban infrastructure. Under the existing prudential framework, risk weights applied to infrastructure loans determine the amount of regulatory capital NBFCs must maintain against such exposures. In practice, uniform risk weights often fail to distinguish between higher and lower-risk projects, potentially constraining capital flow to well-performing assets.

Recognizing this, the RBI has, in the proposed Draft Amendment, introduced differentiated risk weights based on the quality of underlying infrastructure projects, specifically introducing the concept of ‘high-quality infrastructure projects’. This approach parallels earlier regulatory calibrations made for banks, thereby fostering parity across financial intermediaries.

Key provisions of the Draft Amendment

The Draft Amendment introduces a new sub-paragraph 5.1.14(A) under the ‘Definitions’ section, which sets out the criteria for classifying high-quality infrastructure projects. Projects meeting all of the following conditions would be eligible for the revised, lower risk weights:

1. The project must have completed at least one year of satisfactory operations post-commercial operation date (COD).
2. The exposure must be classified as ‘standard’ in the lender’s books.
3. The obligor’s revenues must depend primarily on a Central Government or Public Sector Entity counterparty, with contractual certainty of payments (for example., availability-based or take-or-pay provisions).
4. Contractual provisions must afford creditor protection, including escrowed cash flows, the lender’s first charge over all the project assets, both moveable and immovable, and safeguards for the creditors in case of early termination.
5. The obligor must have adequate internal or external funding arrangements to meet ongoing working capital and future needs, as assessed by the lender.
6. The obligor must be restricted from actions detrimental to creditors, such as raising further debt against project cash flows without the creditor’s consent.

These conditions collectively define projects that are operationally stable, financially secure, and supported by credible public-sector revenue streams—hallmarks of the high-quality infrastructure projects category.

Further, Paragraph 84 of the Chapter IX-Prudential Regulation section of the Master Direction is proposed to be amended to revise the applicable risk weights for such projects:

1. 50% risk weight for loans to high-quality infrastructure projects where at least 10% of the sanctioned amount has been repaid by the obligor.
2. 75% risk weight for loans to high-quality projects where the obligor has repaid at least 5% but less than 10% of the sanctioned amount.

In cases where a project ceases to meet the qualifying conditions, it will revert to the higher risk weights prescribed for general infrastructure exposures.

The amendments are set to take effect from April 1, 2026, or earlier if adopted voluntarily by an NBFC.

Under the existing framework, all PPP and post-COD infrastructure projects beyond one year of commercial operation typically attract a uniform 50% risk weight. The proposed amendment adds granularity by linking risk weights to the repayment track record and quality of the asset. This nuanced calibration seeks to strengthen prudential discipline while rewarding financial soundness.

The move echoes RBI’s broader prudential philosophy encouraging long-term funding to viable infrastructure without compromising systemic stability. For NBFCs, lower risk weights effectively free up capital, enhancing their ability to extend fresh credit to priority infrastructure sectors.

The Draft Amendment represents a measured evolution in India’s prudential regulatory framework. By rewarding performance and structural integrity through calibrated risk weights, the proposal aligns financial regulation with real-economy outcomes. As the consultation process unfolds, the policy’s success will hinge on careful implementation and consistent adherence to the criteria defining high-quality infrastructure projects. In essence, it signals a regulatory framework moving from uniformity to differentiation, anchoring stability while empowering growth.