The infrastructure financing landscape has undergone a substantial evolution, driven by financial and policy support. Of late, the sector has further benefited from the expanding role of development finance institutions. In an interview with Indian Infrastructure, Rajkiran Rai G., Managing Director, National Bank for Financing Infrastructure and Development (NaBFID), shared his views on the emerging needs of infrastructure, the role played by NaBFID in bridging existing gaps, and efforts to revive private sector interest. Excerpts…
What are the key financing gaps in India’s infrastructure development? What role is NaBFID playing in addressing these?
India’s infrastructure ambitions, aligned with the $30 trillion economy vision by 2047, require massive capital infusion, with over Rs 100 trillion expected to be invested in the next five years alone. While public investment has increased significantly, the gap remains substantial – estimated at over 5 per cent of GDP – from India’s developmental aspirations and climate readiness perspective, due to limited private participation and structural challenges in long-term financing.
Traditional lenders, particularly commercial banks, face an asset-liability mismatch, making them ill-suited for long-gestation infrastructure assets that typically span 20-25 years. Moreover, long-term institutional investors like pension funds and insurers remain underexposed to infrastructure, allocating only 6 per cent of their total assets under management to infrastructure.
NaBFID was established with the mandate not only to lend to the infrastructure sector but also to achieve developmental goals and address the funding gap. Here, our approach rests on three key pillars. First, we provide long-term, non-recourse financing for large, complex infrastructure projects, filling a critical gap left by traditional lenders. Second, through refinancing, we help banks unlock capital tied up in long-tenor loans, enabling them to fund new projects. Third, we are focused on developing the bond market, introducing credit enhancement mechanisms and standardised instruments to build investor confidence and crowd in private capital. NaBFID’s goal is to go beyond traditional lending and to act as a market-maker and key enabler of India’s infrastructure financing ecosystem.
What is NaBFID’s current lending portfolio? Which infrastructure sectors are you prioritising?
As of June 2025, we have achieved cumulative sanctions of Rs 2.23 trillion, with a strategically diversified lending portfolio across key infrastructure sectors. Roads make up the largest share at 36 per cent, followed by renewable energy at 26 per cent. Conventional power generation represents about 10 per cent of our portfolio. Apart from this, we have exposure in power transmission and distribution, social infrastructure, water and sanitation and emerging digital infrastructure like data centres. Notably, around 66 per cent of our total sanctioned portfolio is externally rated as AA and above, underscoring our focus on prudent credit standards and risk-aligned growth. It is worth highlighting that 76 per cent of our sanction portfolio has a tenor of more than 15 years, indicating our ability to structure and sustain long-tenor financing. While roads and renewable energy have a major share in the sanction portfolio, the institution is committed to financing both conventional and new-age and underserved sectors.
How is NaBFID leveraging innovative financial instruments and models to support large-scale infrastructure development?
While traditional project finance remains important, it is insufficient to meet the scale and complexity of India’s infrastructure needs. At NaBFID, innovation lies at the core of our approach – we are not just lenders, we are also market-makers. We are actively developing and deploying a range of innovative financial instruments tailored to unlock capital at scale.
NaBFID will offer credit enhancement solutions such as partial credit guarantees to improve project ratings, enabling access to long-term capital from institutional investors such as pension funds and insurers, which typically invest in only higher-rated instruments. We are also structuring committed takeout financing, allowing commercial banks to fund the initial construction phase of projects with the assurance that NaBFID will refinance them for longer tenors once the project is operational. This eases banks’ asset-liability mismatches and frees up capital for new lending. Furthermore, we can support asset monetisation through infrastructure investment trusts (InvITs).
We are also exploring the securitisation of infrastructure loans and the creation of infrastructure debt funds and InvITs. By bundling operational projects into marketable instruments, we aim to create liquid, tradable securities that attract a broader investor base and strengthen the secondary infrastructure debt market. Our appraisal and underwriting capabilities lend credibility and confidence to investors.
In addition, for socially impactful projects that may not be commercially viable on their own, we are designing blended finance structures. Through these efforts, we are not only financing individual projects, we are building a more sophisticated, liquid and resilient ecosystem.
What are your views on reviving investor interest in PPP-based infrastructure projects? What steps are being taken to enhance bankability and reduce the perceived risk for private investors?
Reviving private sector interest in public-private partnerships (PPPs) is essential since the government alone cannot fund India’s ambitious infrastructure plans. Hurdles posed by past challenges, such as land acquisition, delays in regulatory clearances and disputes in concession agreements, have taught us valuable lessons. Today, we remain optimistic about the revival of the PPP model, driven significantly by the government’s commitment to establishing a stable and predictable policy framework. For instance, risk allocation has improved significantly, with the government taking on key pre-construction risks such as land and environmental clearances. Successful models such as the hybrid annuity model have demonstrated how effective risk-sharing can boost investor confidence. Concession agreements are also evolving to be fairer and clearer, with stronger dispute resolution mechanisms to provide timely and transparent conflict management.
At NaBFID, we are actively supporting this revival through strategic partnerships, such as our collaboration with the International Finance Corporation (IFC) to develop a pipeline of investment-ready PPP projects focused on sustainability and climate resilience. Our aim in offering credit enhancements, guarantees and other risk mitigation tools, particularly for early-stage and greenfield projects, is to improve bankability and attract investors.
Transparency is another key focus. We are working to establish India’s first comprehensive infrastructure data repository, which will reduce information gaps and perceived risks. Additionally, we work closely with governments, regulators and institutions to advocate policy reforms, streamline approvals and ensure contract sanctity to reduce uncertainty and build investor trust. NaBFID aims to attract private capital by leveraging the evolving policy framework and implementing a well-structured risk-sharing model.
“NaBFID’s goal is to go beyond traditional lending and to be a key enabler of India’s infrastructure financing ecosystem.”
What are your views and plans regarding mobilising long-term capital, including from global pension and sovereign wealth funds?
Mobilising long-term capital is essential to support India’s infrastructure goals, with domestic insurance and pension funds, as well as global pension and sovereign wealth funds, serving as vital sources of patient capital. So far, domestically, we have raised Rs 441.76 billion through nine tranches of non-convertible debentures with tenors of 5 to 20 years. Going forward, we plan to broaden our investor base by raising foreign capital. Our strategy for this is built around a three-pillar approach: direct engagement with global investors, strategic partnerships with multilateral institutions, and the creation of a credible market presence. We have been actively engaging with a diverse range of global investors to highlight the vast infrastructure opportunities in India. As a part of our collaboration with multilateral institutions, we have signed MoUs with the IFC and the New Development Bank, and letters of intent with the Asian Development Bank to co-finance and de-risk projects, thereby gaining access to foreign capital. NaBFID is enhancing its market profile to attract global funding. We have secured a Baa3 (Stable) rating from Moody’s and a BBB- (Stable) rating from Fitch (on par with sovereign rating), and our plan to raise resources in foreign currency has gained significant media attention.
We are advocating the rationalisation of investment norms for domestic insurance and pension funds to unlock more long-term capital for infrastructure. A breakthrough towards this will be the introduction of partial credit enhancement (PCE) for eligible issuers. This will open new avenues for long-term investors.
What will be your key priorities in the next two to three years? Are you looking at future-focused infrastructure such as digital infrastructure, electric vehicles or smart urban infrastructure?
Over the next two to three years, our focus will be on deepening our role as a development-oriented institution by advancing three strategic priorities.
First, we aim to strengthen transaction advisory services to improve project preparation, risk allocation and bankability, particularly for complex and PPP infrastructure projects. High-quality project development is critical to attracting private capital at scale. We are already engaging with state governments for implementing urban infrastructure projects. Second, we are committed to developing the infrastructure bond market, primarily through tools like PCE and securitisation. These instruments will help unlock long-term capital from institutional investors by improving credit quality and creating investable debt assets. Third, we plan to play a catalytic role in equity participation for infrastructure projects where required, particularly in the early stages, to help crowd in private investment and de-risk capital formation.
Indeed, future-focused infrastructure is very much on our agenda. The surge in data localisation and growing interest from hyperscalers has spurred significant development in the data centre sector across India, and we have supported these expansions. Inclusive growth remains paramount, and NaBFID is also exploring opportunities in the development of satellite cities and infrastructure parks. To improve the quality of living in Indian cities, we have developed innovative solutions to finance waste-to-energy and wastewater treatment projects. We are also supporting urban local bodies in diversifying their resources by tapping capital from markets – both by investing in their bond issuances and by improving ratings through facilities like PCE.
