The Reserve Bank of India has created a new category of non-banking finance companies, called infrastructure finance companies (IFCs), to boost infrastructure financing. The step has been taken as the banks are reluctant to lend long-term loans to infrastructure projects, which require a longer gestation period.

In order to encourage setting up of IFCs, the RBI has extended several sops. These include, allowing IFCs to exceed the concentration of credit to a single borrower by 10 percent of its owned fund and by 15 percent to a group of borrowers.  In case of group lending and investing, an IFC can exceed the limit of 5 percent of its own fund to a single party and 10 percent to a single group of parties.

Companies aspiring to be an IFC should have a minimum of 75 percent of its total asset deployed in infrastructure loans and with net owned fund of Rs 300 crore or more qualify for the IFC. The company should also have a minimum credit rating of 'A' or equivalent.

The move comes at a time when the bankers asked RBI to include infrastructure loans in the category of priority sector advances and exempt infrastructure bonds from mandatory cash requirements as they struggled to finance long-term projects.