The Reserve Bank of India has relaxed its norms relating to the lending in the infrastructure sector, according to a notification released on Friday.

The central bank has created a new category of non-banking finance companies known as infrastructure finance companies taking the type of finance companies to four others being asset finance companies, loan companies and investment companies.

RBI has extended special sops to the companies under this category in order to increase lending in the infrastructure sector. The banks will now be permitted to invest more in the infrastructure companies as the limit for exposure had been raised to 20 per cent of their capital funds.

RBI guidelines state that if a company wants to be classified as an IFC it should have at least 75 per cent of its total assets deployed in infrastructure loans along with that it should have net owned funds of Rs 300 crore or above.

The criterion also requires the company to have a minimum credit rating 'A' or equivalent from the rating agencies and also a capital adequacy ratio of 15 per cent.

The special sops offered to the IFCs in lending includes that the company can exceed the limit of credit norms to any single borrower by ten per cent of its owned fund and single group of borrowers by 15 per cent of its owned fund.

And in the case of group lending the company can exceed the limit of five per cent of its owned fund to a single party and ten cent of its owned fund to a single group of parties.

The non banking financial companies had been requesting the RBI to create a new category of such firms as these firms are significant due to their lending to an important sector like infrastructure. The RBI has also associated the risk weight of bank's exposure to infrastructure finance companies and their credit rating.

Financial companies were reluctant to lend to the infrastructure sector due to long duration of the projects. The move by RBI to relax credit norms should help boost lending in the sector. Some banks have urged the RBI to include infrastructure lending in category of priority sector lending.

The RBI statement said "This is also done in pursuance of the announcement made in the second quarter review of monetary policy 2009-10. Further with a view to encouraging larger flow of funds to infrastructure, the exposure of a bank to infrastructure finance companies has been enhanced up to 20% of its capital fund."