Infra financing not an issue; need to increase project pipeline: NaBFID MD

The government has acknowledged the need for this product and made the Budget announcements. Concurrently, we have been working on developing the product, said NaBFID MD

The National Bank for Financing Infrastructure and Development (NaBFID), a state-owned infrastructure-focused development financial institution (DFI), is planning to go big on financing airport construction in 2025-26, says Managing Director Rajkiran Rai G in an interview with Harsh Kumar in New Delhi. Edited excerpts:

 

This year’s Union Budget mentioned NaBFID would set up a “partial credit enhancement facility” for corporate bonds for infrastructure. How do you see this? 

We initiated partial credit enhancement over the past two years, following the establishment of the National Asset Reconstruction Company (NARCL). One of NARCL’s key mandates is developing the bond market. For this certain enablers are essential, and partial credit enhancement is one of them. We began advocating this after noting that while the Reserve Bank of India (RBI) issued guidelines in 2015, subsequent modifications did not lead to significant product development. Recently the RBI gave NARCL permission to provide partial credit enhancement.

 

The government has acknowledged the need for this product and made the Budget announcements. Concurrently, we have been working on developing the product. We anticipate releasing the guidelines in about a month. We are now in the process of finalising the product and will provide details soon. 

What is your outlook on infrastructure financing in India? 

Financing isn’t an issue right now. Viable infrastructure projects are being funded owing to strong execution. In my last presentation to our infrastructure foundation, I noted default rates were currently below 1 per cent. Over the past decade, the infrastructure sector has performed exceptionally well. We’re also seeing significant foreign investment flowing into infrastructure debt, real estate investment trusts, and renewable-energy companies. Therefore, I don’t anticipate any financing challenges; we simply need to expand our project pipeline. 

What will be the new focus areas of financing for the coming years? 

Now we are not involved in airport financing, but there have been announcements happening in that sector. And we plan to enter this space. Historically, financing airports in India, including those in cities like Mumbai and Visakhapatnam, has not been a challenge. When competition is there and banks are willing to finance, there’s typically no need for additional support. 

In cases where financing becomes problematic, we may consider intervention. It’s essential to recognise that banks may not fully understand the dynamics involved in these projects. 

We recently financed irrigation and drilling projects in Rajasthan, which required long moratorium periods. Generally, we provide long-term loans, often up to 30 years. In fact, we are one of the few institutions that can offer such long tenures. To date, over 60 per cent of our loan sanctions have been for terms exceeding 15 years. 

The Budget said the government would set up an “urban challenge fund” of Rs 1 trillion to implement measures announced in the Budget last year. What will be your share of loans in it?

 

Many urban local bodies face financial challenges. A fund aims to address this issue and will support urban infrastructure projects, primarily in areas such as sewage treatment, solid waste management, and waste-to-biogas. We launched a product today (Thursday). The government’s enabling measure states that if a bankable project can secure at least 50 per cent of its cost through loans or bonds, the government will contribute an additional 20 per cent. This alleviates the financial burden on urban

local bodies.