Banks' era of infrastructure funding is over: Nabfid chairman K V Kamath

NaBFID Chairman KV Kamath says banks can no longer be primary infra financiers due to structural limits, with markets and DFIs better placed to meet India's long-term needs

The era of banks being the primary source of infrastructure funding is over, said KV Kamath, Chairman of the National Bank for Financing Infrastructure and Development (NaBFID).

 

He stated that bank credit for long-term infrastructure projects is a no-go as banks have short-term liabilities, which prevent them from lending to projects with a tenure of more than 10–15 years, highlighting maturity mismatch as a structural constraint.

 

Instead, the financing baton is being passed to capital markets, mutual funds, pension funds and insurance companies, which are inherently better suited for long-duration investments. He pointed out that these markets have matured significantly in recent years.

   

“What was unthinkable five years ago—raising capital outside the banking system—is now happening. Corporate India is increasingly funding itself through internal accruals, equity markets and bond markets,” Kamath said.

 

According to data, defaults by infrastructure companies fell from 8.5 per cent in FY16 to just 0.3 per cent in FY24. However, commercial banks’ credit growth to infrastructure has slowed, dropping from 10 per cent pre-2020 to a projected 5 per cent in FY26. This decline underlines the need for specialised financial institutions and innovative instruments to fill the gap. 

 

On whether India needs more development finance institutions (DFIs), Kamath said that rather than multiplying institutions, strengthening existing DFIs with capital and innovative structures is the way forward.

 

“As infrastructure books grow, DFIs like NaBFID will need capital—hybrid, tier-1 and more. But the structure is in place. We don’t need more institutions, just stronger ones,” he said.

 

India’s infrastructure financing story is shifting from constraint to opportunity. “If we keep GDP growth at 7.5–8 per cent, the system won’t run short of funds. It’s about momentum, trust and smart deployment,” Kamath concluded.

 

To achieve the ‘Viksit Bharat’ vision by 2047, India needs to invest Rs 776 trillion in infrastructure—more than four times the current total credit book of the Indian banking sector, which stands at about Rs 186 trillion.