RBI issues guidelines on credit enhancement facilities supporting infrastructure financing

The Reserve Bank of India (RBI) has issued the Non-Fund Based Credit Facilities Directions, 2025. Under the new guidelines regulated entities (REs), including banks, All India Financial Institutions (AIFIs), alternative investment funds (AIFs), non-banking financial companies (NBFCs), and development finance institutions, have been permitted to provide credit enhancement facilities. This measure will help infrastructure companies improve their credit ratings while freeing up bank limits. All REs have been allowed to extend partial credit enhancement (PCE) to bonds issued by corporates or special purpose vehicles (SPVs) for funding all types of projects, as well as to bonds issued by non-deposit-taking NBFCs with an asset size of at least Rs 10 billion. The RBI has also permitted regulated entities to provide credit enhancement support to municipal bonds. The credit enhancement limit has been increased to 50 per cent of the bond issue, up from 20 per cent earlier.