This regulatory change aligns with the RBI’s strategy to bolster IDF-NBFCs’ role in infrastructure financing. Credit: Shutter_M/Shutterstock.

India’s insurance industry regulator has eased norms related to investment in non-banking financial companies’ (NBFCs) infrastructure debt funds (IDFs) by insurance companies.  

Previously, insurance companies needed case-by-case approval from the Insurance Regulatory and Development Authority of India (IRDAI) to invest in central government-backed IDFs. 

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The IRDAI’s latest regulation removes this requirement, signalling a push to encourage insurers to contribute more significantly to the infrastructure sector and to streamline the investment process. 

In a statement, the regulator said: “To encourage further investments by insurers in the infrastructure sector and to enhance ease of doing business, the requirement of case to case approval for an investment in IDF is done away with.” 

The new IRDAI regulation stipulates that insurers can invest in IDF-NBFCs registered with the RBI, provided these funds have a minimum credit rating of AA or equivalent from a Credit Rating Agency recognised by the Securities and Exchange Board of India.  

These investments must be in debt securities with a residual tenure of no less than five years, the IRDAI added. 

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The regulatory change aligns with the RBI’s strategy, announced in August 2023, to bolster IDF-NBFCs’ role in infrastructure financing. 

In September 2023, the IRDAI announced new norms that give policyholders with withdrawn life insurance offerings – which are not accepting new applications – more options and benefits. 

The policies that are in effect on insurers’ books but are not currently for sale are covered by these provisions. 

The goal of the directive is to ensure that the benefits of current policyholders are not negatively impacted while providing them with better options and advantages, as well as more flexibility.