RBI permits CICs to invest in Infrastructure Investment Trusts as Sponsors

In a bid to encourage investments in core sector projects, the RBI has also decided to permit core investment companies (CICs) to invest in Infrastructure Investment Trusts (InvITs) as sponsors. With this approval, CICs will now be permitted to reckon their holdings of InvIT units as sponsors as part of the sub-limit of 60 per cent for equity investments in group companies. The Core Investment Companies (CICs) registered with the RBI as Non-Bank Financial Companies (NBFCs) primarily invest in group companies and do not carry out any other NBFC activity. 

RBI's statement on developmental and regulatory policies said that CICs "are required to invest in group companies in the form of equity shares, preference shares, bonds, debentures, debt or loans, at least up to 90 per cent of their net assets, while equity investments in group companies must constitute at least 60 per cent of net assets."

To promote infrastructure development through investment in InvITs, the apex bank stated to have decided to "enable CICs to act as sponsors to InvIT issuances and permit them to reckon their holdings of InvIT units as sponsors as part of the sub-limit of 60 percent for equity investments in group companies."

"Exposure of such CICs towards InvITs shall be limited to their holdings as sponsors and shall not, at any point in time, exceed the minimum limit in terms of amount and tenor prescribed in this regard by Securities and Exchange Board of India (SEBI) (Infrastructure Investment Trusts) Regulations, 2014," the statement added.

The RBI also clarified that necessary instructions in this regard will be issued within a week.

In a major relief to MSMEs, the RBI also eased NPA classification norms for such units facing input credit linkages and associated issues under the Goods and Services Tax. 

Notably, RBI on Wednesday hiked the key rate for the first time in over four years -- by 0.25 per cent -- to curb inflationary pressures from high oil prices. The move will translate into higher EMIs for home, auto and other loans.

With all its members voting for increasing the key rate, the 6-member Monetary Policy Committee (MPC) surprised markets by raising the repo rate, at which it lends to other banks, to 6.25 per cent but kept its policy stance as "neutral".

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Further, the reverse repo rate, at which it borrows from banks, was also raised by similar proportion to 6 per cent. This is the first hike in interest rate since January 28, 2014 when rates were hiked by a similar proportion to 8 per cent.