The National Bank for Financing Infrastructure and Development (NaBFID) aims to increase its assets—including loans and investments—to 10 percent of the nation’s overall infrastructure financing within four to five years, up from the current 3 percent. In a recent interview with BusinessLine, Rajkiran Rai G, Managing Director and CEO, emphasized that NaBFID was established in 2021 through an Act of Parliament to fulfill the long-term financing needs of the infrastructure sector.
To enhance the ratings of bonds issued by infrastructure project developers, NaBFID has launched a partial credit enhancement (PCE) facility, which Rai hopes will attract investments from insurance companies, pension funds, and provident funds seeking higher yields. This initiative aims to connect those with capital looking for better returns and infrastructure project developers needing financing.
Rai pointed out that urban infrastructure presents a significant opportunity for financing. NaBFID’s long-term objective is to raise $2 billion annually from global markets to support the infrastructure financing demands of the Indian economy.
When asked about the current credit environment, Rai acknowledged that overly comfortable conditions could foster complacency within the banking sector. “Cycles always turn,” he stated, adding that if institutions fail to prepare, problems may arise. Nevertheless, he noted that regulatory preparedness and improved risk management have contributed to the relative stability of India’s financial system, even amid global uncertainties.
Reflecting on the past financial year (FY26), Rai characterized it as a strong year, marking NaBFID’s first full operational year. The bank’s outstanding loan book surged approximately 95 percent year-on-year to ₹1,16,950 crore by March 2026, up from ₹59,840 crore the previous year. In FY26, NaBFID sanctioned and disbursed loans totaling ₹1,33,020 crore (31 percent increase) and ₹74,519 crore (94 percent increase), respectively. Cumulatively, sanctions since FY23 have reached around ₹3.3 lakh crore, with road and renewable energy projects making up significant portions of the portfolio.
For FY27, NaBFID anticipates its loan book nearing ₹2 lakh crore by the end of March 2027. Total disbursements for this year are expected to be about ₹80,000 crore. Rai mentioned that the institution follows a balanced lending model, with 50 percent comprising operational assets (lower risk) and the remaining greenfield projects (higher risk, long-term growth), ensuring balance sheet safety.
Emerging focus areas for lending include urban infrastructure—water supply, sewage treatment, solid waste management, urban mobility, healthcare, and education—although current lending to this segment is relatively low.
Rai differentiated NaBFID from other infrastructure financiers by its provision of long-tenor loans, some extending up to 30 years. This extended timeframe aligns repayments with project cash flows and mitigates default risk, with 66 percent of their loans exceeding a 15-year tenure. The institution’s board-driven structure allows for the hiring of market talent and the flexibility to craft complex financial deals.
Rai also called for a shift in infrastructure financing modes, suggesting that banks focus on funding greenfield projects while operational infrastructure assets transition to the bond market after stabilization. This change would enhance capital allocation efficiency within the financial system.
With changing savings patterns in India, Rai noted that more depositors are exploring alternative avenues for higher returns, questioning why infrastructure projects are not yet effectively tapping into these resources. A structural shift has seen rising allocations to insurance, pension, and provident funds, which now manage approximately ₹120 lakh crore, growing at 15–18 percent. However, regulatory constraints lead these funds to favor safe investments, restricting returns for savers and limiting infrastructure funding.
To address this issue, NaBFID introduced the PCE facility in September 2025 to provide first-loss guarantees of 20-50 percent, enhancing the credit ratings of lower-rated infrastructure entities from BBB to AA. This enhancement will allow insurance and pension funds to make safer investments, connecting long-term savings to infrastructure projects.
Rai highlighted that India requires about ₹30 lakh crore annually for infrastructure but is currently able to secure around ₹20 lakh crore, leaving a gap of ₹10 lakh crore. He projected that up to ₹5 lakh crore could flow into infrastructure bonds through the PCE mechanism, partially bridging this financing gap.
NaBFID is not merely creating products but is also focused on building an ecosystem that connects capital from pension and insurance funds with the financing needs of infrastructure projects. This includes collaboration with regulators to enable new frameworks and developing bond markets.
In terms of expected returns, Rai indicated that while government securities yield around 7 percent, PCE-backed infrastructure bonds aim to provide approximately 8.5 percent. This additional return comes with increased risk but is structured to remain attractive for investors through insurance and pension funds.
