Infra firms rely on banks as bond market shuns low-rated debt: PFRDA chief

PFRDA Chairman Sivasubramanian Ramann says infra firms depend on banks as bond markets avoid long-tenor, lower-rated debt, urging innovative frameworks and stronger ESG focus

Corporate bond markets are skewed towards AA-rated and above bonds with tenors under five years, pushing infrastructure companies to rely on banks and financial institutions for funding, said Sivasubramanian Ramann, chairman of Pension Fund Regulatory and Development Authority (PFRDA) on Thursday. 

 

Political, regulatory, and execution risks deter long-term investments, said Ramann. He added that many infrastructure projects are rated BBB or below, limiting access to institutional investors.

 

Bankability issues persist due to inadequate project preparation, weak risk-sharing frameworks, and limited revenue visibility, he said.

 

“Political, regulatory and execution risks discourage long-term commitments. The downside, or the flip side of expanding the scope of infrastructure also will require novel regulatory and financing frameworks for the newer categories within the infrastructure stable. Traditional models are not fully suited to assess risk revenues or long-term liabilities of such emerging sectors,” said Ramann. He was speaking at the National Bank for Financing Infrastructure and Development Infrastructure Conclave 2025.

 

He further said that most infrastructure firms carry high leverage because they have a large portfolio of projects that are still under construction and hence are not generating cash flows.

 

“Most infrastructure companies have high leverage and significant portfolios of under-construction infrastructure. Hence, they do not have high credit ratings. Further to the long gestation periods for most of these projects, borrowers prefer raising mostly long-tenor bonds,” he said.

 

He also said that environmental, social, and governance (ESG) considerations are rapidly becoming central to investment decision-making globally.

 

For Indian infrastructure projects aiming to tap into international pools of capital, strong ESG compliance is no longer optional, but a prerequisite.

 

He said that bridging the gap between India’s infrastructure needs and ESG expectations of foreign investors calls for innovative financial solutions. Expanding partial credit enhancement (PCE) schemes and facilitating the securitisation of infrastructure loans can help unlock long-term capital from insurance and pension funds. These funds traditionally invest only in investment-grade instruments.