The government has launched several policies and plans like PM Gatishakti National Master Plan, National Logistics Policy, National Infrastructure Pipeline (NIP), National Monetisation Pipeline, etc. to boost the infrastructure development in the country. To bridge financing gap envisaged in NIP, the government set-up National Bank for Financing Infrastructure and Development in 2021 to directly finance as also crowd-in private capital to infrastructure sector. The principal idea was to provide a dedicated and specialized institution focused on addressing the long-term financing needs of the infrastructure sector.
Infrastructure development is a critical driver of economic growth and development, and a reliable source of funding is essential to support the timely and efficient deployment of large-scale infrastructure projects. As such, NaBFID aims to be a key partner in helping India achieve its ambitious infrastructure development objectives – responsibly and sustainably. To achieve its US$ 5 trillion ambition, it is imperative for infrastructure investment to grow annually at the rate of 8-10% over the next 5 years. NaBFID is playing a pivotal role in helping India meet its arduous infrastructural resolve, by providing the necessary financing, expertise, technology, and analytics to support the development of this sector.
“NaBFID is working to unlock new sources of capital and create a sustainable infrastructure financing ecosystem”
Mr. Rajkiran Rai G. is currently Managing Director at National Bank for Financing Infrastructure and Development, a development finance institution set-up by Government of India aimed at supporting the country’s infrastructure sector. Earlier, he served as MD & CEO at Union Bank of India, wherein he oversaw successful amalgamation of Andhra Bank and Corporation Bank into Union Bank of India. Mr. Rai served as Executive Director at Oriental Bank of Commerce and also served on the Boards of several companies, including Exim Bank, Star Union Dai-chi Life Insurance, Union Asset Management Company Ltd. Mr. Rai has held key positions in his 38 years career, including Chairman of the IBA and contributed to the Banks Board Bureau. He has also been conferred Honorary Fellowship by the Indian Institute of Banking & Finance (IIBF) in recognition of his contribution to the field of banking and finance.
With Indian Economy & Market, in a freewheeling chat Mr. Rajkiran Rai G. dwells at length about the strategies and the road ahead.
As infrastructure largely comes under the ambit of public good, private players are often reluctant to engage in its construction. In such a situation the governments have to do heavy lifting. Do you think that the government and regulators are on the right path to fulfil this responsibility?
Yes. Budgetary resources account for over three-fourths of spending on infrastructure, making government the major stakeholder in development of infrastructure. In recent years, the central government has placed a lot of emphasis on infrastructure development to bring down the logistics costs and ease supply side bottlenecks facing economy. This is evident from increasing capital expenditure (Capex) to GDP ratio which has risen from 1.71 percent in FY16 (Financial year 2015-16) BE (Budget estimate) to 3.14 percent of GDP in FY26 BE. Due to these efforts India’s rank improved in World Bank’s Logistics Performance Index from 54th in 2014 to 38th in 2023. Bulk of the capex has been allocated to infrastructure ministries (88 per cent in Union Budget FY26) which includes Ministries of Power, Railways, Road Transport and Highways, etc.
The government has also proactively launched several policies and plans like PM Gatishakti National Master Plan, which allows integrated project planning, National Logistics Policy, National Infrastructure Pipeline (NIP), National Monetisation Pipeline, etc. to boost the infrastructure development in the country. To bridge financing gap envisaged in NIP, the government set-up a development financial institution namely National Bank for Financing Infrastructure and Development in 2021 to directly finance as also crowd-in private capital to infrastructure sector.
We have been enabling institutions like NHAI (Roads), TRAI (Telecommunication), AAI (Airports), SECI (Solar Energy), IREDA (Renewable) etc. for infrastructure sub-sectors providing clear regulatory frameworks and facilitating project approvals. The RBI has also taken several initiatives to promote infrastructure financing for economic development. It has allowed banks to issue long-term infrastructure bonds, which are exempted from Priority Sector Lending requirements and are not subjected to CRR/SLR requirements, to raise market funds. Bank’s lending to Infrastructure Investment Trust (InvITs) was permitted since 2019. RBI has also permitted NBFCs to exceed the specified credit exposure limit to a single borrower by an additional 5 percent, if the extra exposure is allocated to infrastructure projects. Apart from RBI, SEBI has also taken measures to enhance investor confidence for investing into ReITs (Real Estate Investment Trust) and InvITs (Infrastructure Investment Trust).
NaBFID plans to support financing of inter alia renewable energy sub-sectors through concessional finance arrangements. The institution is evaluating a launch of dedicated green financing, transition finance lines and such other measures to attain a position of leadership in climate finance.
The finance minister proposed several enablers for the infrastructure sector in Union Budget 2025. How do you see these announcements making an impact on infrastructure space in India?
Apart from the budgetary allocations, the Union Budget for 2025-26 has a plethora of enabling announcements for the infrastructure sector. Some of the key announcements include, NaBFID setting up a ‘Partial Credit Enhancement (PCE) Facility’ for corporate bonds for infrastructure financing; each infrastructure-related ministry to come up with a 3-year pipeline of projects that can be implemented in Public Private Partnership (PPP) mode, and for furthering PPPs and assisting private sector in project planning, access to relevant data and maps from the PM Gati Shakti portal. Lastly outlay of Rs 1.5 lakh crore as 50-year interest free loans to support states in incurring capital expenditure and to incentivise reforms, etc.
Further, the scope of infrastructure has been expanded with large ships above a specified size and hotels in top 50 tourist destinations to be a part of Infrastructure Harmonised Master List (HML). Many other sector specific announcements have also been made for Urban (Urban Challenge Fund), Marine (Shipbuilding Clusters, Maritime Development Fund) and Aviation (modified UDAN scheme, Greenfield airports in Bihar) sectors. The government also aims to generate Rs 10 lakh crore in the period 2025-30 with a pipeline of assets under the second phase of its Asset Monetisation Plan.
All the initiatives announced in the Budget are expected to bring out positive outcomes. Access to capital for infrastructure projects will be enhanced via development of corporate bond markets through establishment of PCE Facility by NaBFID. The increased private participation in various phases of infrastructure projects due to focus on enhancing PPPs will enable leveraging of private sector strengths like efficiency and access to the latest technology. The Urban Challenge Fund is expected to bring about improvement in city infrastructure with innovative solutions for urban development being implemented. The pace of infrastructure development under the ambit of state governments is set to increase due to 50-year interest free loans provided to them.
Earlier DFIs have faced challenges in securing a reliable source of funding for the long term. How does NaBFID plan to attract long-term investors (including foreign capital)?
NaBFID is actively working to unlock new sources of capital, strengthen credit markets, and create a more sustainable infrastructure financing ecosystem. Recent policy reforms, including relaxed exposure limits and encouragement for investments via Infrastructure Investment Trusts (InvITs), are enabling deeper participation from pension funds. Further, evolving regulatory frameworks and growing investor confidence point to a significant untapped potential. We are also planning to establish the country’s first data repository for the infrastructure sector to attract private investment by offering greater transparency and detailed information about new and ongoing infrastructure projects.
In a significant milestone, on January 16, 2025, the Reserve Bank of India approved NaBFID’s PCE (Partial Credit Enhancement) facility which will strengthen de-risking of infrastructure projects, making them more attractive for investors and unlocking greater capital inflows into the sector. NaBFID is in advanced discussions with the World Bank to leverage credit enhancement facilities, share credit risks, and improve corporate bond ratings for infrastructure projects.
With a growing population in urban towns and cities, the Union Budget has rightly focussed upon urban infrastructure development. Apart from direct lending for such projects, how can NaBFID contribute to developing urban infrastructure in light of rapidly urbanizing population?
The Union Budget 2025 made 54 per cent higher allocation for capex budget of Ministry of Housing and Urban Affairs to Rs 1.5 trillion, underscoring a shift in centre’s priorities towards last mile infrastructure delivery. With regards to growing financing needs for Urban Local Bodies (ULBs), NaBFID aims at pooling of assets of ULBs into InvIT like structures to make them attractive from capital unlocking perspective. In this structure, the not so strong projects can be pooled with little stronger projects making the ULB projects financially viable. NaBFID can be one of the advisors regarding asset structuring model to minimize costs and maximize efficiencies. In addition to giving Transaction Advisory Services (TAS) to the ULBs and evaluating their assets, NaBFID can also be an investor in these structures. The partial credit enhancement (PCE) facility can help ULBs tap corporate bond markets with enhanced ratings and therewith secure long-term capital at finer rates. We are in talks with multilateral development banks (MDBs) such as Asian Development Bank and World Bank for collaboration to manage the financing needs of India’s Municipal Corporations.
India requires a lot of green fuel to realize its dreams and aspirations towards becoming Net Zero by 2070. Besides creating conventional infrastructure assets (Roads, Power, Telecom etc.), what would be the role of NaBFID in creation of a green market infrastructure ecosystem?
We are already working with various MDBs like ADB, KEXIM and others to channelise concessional finance into India and create blended finance structures (likely to base on co-financing mechanism) for financing various infrastructure sub-sectors. NaBFID plans to support financing of inter alia renewable energy sub-sectors through these concessional finance arrangements. The institution is evaluating a launch of dedicated green financing, transition finance lines and such other measures to attain a position of leadership in climate finance. We are also evaluating launch of pool fund structure at GIFT City for on lending to various sub-sectors. This would involve raising funds from overseas sources into a dedicated fund and then channelising the fund towards investing into various infrastructure sub-sectors including renewable energy sector.
