India’s infrastructure financing ecosystem is being shaped by a gradual inflow of private capital and innovative market-based instruments, alongside high public expenditure. In this evolving dynamic, dedicated development finance institutions are increasingly stepping up to de-risk projects, unlock institutional capital and catalyse long-term growth across both conventional and emerging sectors. In an interview with Indian Infrastructure, Rajkiran Rai G., Managing Director, National Bank for Financing Infrastructure and Development (NaBFID), shared his views on the progress in infrastructure financing, sector-wise investment potential, strategies to resolve bottlenecks and NaBFID’s core priorities for the coming years. Edited excerpts…
How has the financing landscape for infrastructure development evolved recently? What has been NaBFID’s role?
India’s infrastructure financing landscape has evolved significantly over the past decade, moving from a predominantly bank-led model to a more diversified and market-oriented ecosystem. Central government capital expenditure on infrastructure has increased from about Rs 2 trillion in 2014-15 to a budgeted Rs 12.2 trillion for 2026-27, while total infrastructure credit outstanding has reached nearly Rs 35 trillion.
Although banks continue to play an important role, newer sources of capital are increasingly contributing to the sector. A particularly important development has been the monetisation of operational infrastructure assets through infrastructure investment trusts (InvITs) and strategic sales, which has enabled capital recycling and attracted a wider pool of investors. The InvIT ecosystem itself has grown rapidly, with assets under management crossing Rs 7 trillion within a short span of time, creating a transparent investment avenue offering stable returns to long-term investors.
At the same time, the scope of infrastructure financing is expanding beyond traditional sectors such as roads and power to emerging areas including battery energy storage systems, data centres, urban infrastructure, logistics and digital infrastructure. This is broadening the opportunity set for both lenders and investors.
Our institution was established in 2021 to address India’s long-standing infrastructure financing gap and support this evolving ecosystem. In a short span of time, we have sanctioned over Rs 3.6 trillion and built an outstanding portfolio of over Rs 1.3 trillion across sectors such as transport, renewable energy, transmission, ports, healthcare, data centres and social infrastructure. Beyond lending, we are focused on strengthening the broader infrastructure financing architecture through credit enhancement, transaction advisory services, asset monetisation support and initiatives aimed at deepening India’s corporate bond market. Our objective is not only to finance infrastructure creation but also to catalyse the flow of long-term capital into the sector and help build a more resilient and sustainable infrastructure financing ecosystem for the country.
What are the biggest impediments to attracting private capital? What changes are needed to overcome them?
India continues to attract strong investor interest, supported by robust economic growth, improving infrastructure fundamentals and sustained policy reforms. However, attracting private capital requires addressing different challenges at different stages of the asset life cycle.
For greenfield projects, the key impediments remain construction risk, land acquisition and rehabilitation issues, regulatory uncertainties, approval delays and demand risks. Many institutional investors, particularly pension funds and insurance companies, are reluctant to assume these early-stage risks. Therefore, strengthening project preparation, improving contract enforcement, accelerating approvals, and expanding credit enhancement and risk-sharing mechanisms remain critical to crowding in private capital at the development stage.
For operational infrastructure assets, the picture is more encouraging. Once projects establish a stable operating track record and predictable cash flows, they become attractive to long-term investors seeking steady returns. Over the last few years, India has witnessed significant growth in asset monetisation through InvITs and strategic asset transfers. These structures have also enabled developers to recycle capital from mature assets into new infrastructure projects, thereby supporting a virtuous investment cycle.
Going forward, India has an opportunity to attract a greater share of the over $100 trillion of assets managed by global institutional investors. To realise this potential, we need to continue building a pipeline of well-prepared projects, deepen the corporate bond market, expand credit enhancement mechanisms, strengthen dispute resolution frameworks and further promote asset monetisation platforms that provide investors with stable, investment-grade opportunities. Together, these measures can significantly accelerate private capital participation across both greenfield development and operational infrastructure assets.
What is your assessment of the potential for infrastructure bonds, pension and insurance funds, credit enhancement mechanisms, and other forms of institutional capital?
The potential is enormous. Insurance and pension funds are natural investors in infrastructure because both seek long-duration assets with predictable cash flows. Globally, pension and insurance funds account for a significant share of infrastructure investments, whereas their participation in India remains relatively modest.
India’s corporate bond market is currently around 16 per cent of GDP, compared to more than 50 per cent in several developed economies and over 100 per cent in some advanced Asian markets. Expanding the bond market, therefore, represents one of the largest opportunities for infrastructure financing.
We have been engaging with regulatory authorities such as the Employees’ Provident Fund Organisation (EPFO), the Pension Fund Regulatory and Development Authority (PFRDA), and the Insurance Regulatory and Development Authority of India (IRDAI) for relaxation of various restrictions to enable pension funds, provident funds and insurance companies to invest in bonds of infrastructure companies. An important development has been the recent decision of IRDAI to broaden investment avenues for insurance companies by permitting investments in infrastructure special purpose vehicles (SPVs) and eligible private companies. This is a significant step, as it can unlock long-term institutional capital from the insurance sector for infrastructure financing, while also deepening India’s corporate debt market.
Which sectors do you believe will have the greatest financing requirements over the next 5 to 10 years?
As per our estimates, India’s infrastructure investment requirement is estimated at approximately Rs 136 trillion between 2025-26 and 2029-30. To achieve the vision of Viksit Bharat by 2047, the cumulative requirement could reach Rs 770 trillion. Around 50 per cent of this requirement would be for urban infrastructure. With India’s urban population projected to exceed 600 million by 2034, investments in water supply, sewage treatment, waste management and urban transport systems will become increasingly critical.
Apart from this, the power sector will continue to draw a lot of investment, primarily for renewable energy, as India pursues its target of achieving 500 GW of non-fossil fuel energy capacity by 2030. Transmission infrastructure, battery storage and green hydrogen will also require equally substantial investments.
Moreover, demand for capital will remain strong across roads, railways, ports, airports, logistics parks, digital infrastructure and data centres, reflecting the country’s broader ambition of becoming a developed economy by 2047.
What can be done to improve the pipeline of investment-ready projects?
The quality of project preparation is often as important as the availability of financing. International experience shows that every rupee invested in project preparation can unlock multifold investments during implementation. Strengthening feasibility studies, detailed project reports, land acquisition processes, environmental clearances and risk allocation frameworks can materially improve project bankability.
Capacity building at the state government and urban local body level is equally important. Through our Transaction Advisory Services platform, we are already supporting entities such as the Andhra Pradesh Capital Region Development Authority and the J&K Lake Conservation and Management Authority in developing bankable infrastructure projects. Such efforts can significantly improve the pipeline of investment-ready projects and attract greater private participation.
How are you maintaining a balance between NaBFID’s role as a lender and its emerging role as a market-maker, catalyst and institution-builder?
The institute was established with the dual mandate of achieving financial and developmental objectives. We see infrastructure financing and ecosystem development as two sides of the same coin. Expanding infrastructure investment requires deeper and more efficient financing markets, while stronger financing markets help mobilise larger pools of long-term capital for infrastructure. Both objectives are, therefore, closely interlinked and integral to our mandate.
While we continue to support infrastructure creation through long-term lending across both traditional and emerging sectors, we are equally focused on strengthening the broader infrastructure financing ecosystem. A key pillar of this effort is the development of a deep and diversified bond market, as India’s infrastructure ambitions cannot be financed through bank lending alone. We are also supporting the ecosystem through transaction advisory services, capacity building initiatives through our Training Academy, and close collaboration with regulators, governments and multilateral institutions. Furthermore, we are in the process of developing an infrastructure data repository to enhance data availability, transparency and informed decision-making across the sectors. Our objective is not only to provide capital directly, but also to mobilise long-term institutional capital and build the markets, institutions and capabilities required to sustainably finance India’s infrastructure growth over the coming decades.
What will be NaBFID’s top priorities and focus areas for the next two to three years?
Our priorities will revolve around three broad areas. First, scaling up long-term infrastructure financing while maintaining high standards of project appraisal and risk management. Second, accelerating market development initiatives. This includes expanding credit enhancement products, supporting infrastructure bond issuances, increasing institutional investor participation and developing new financing structures capable of mobilising larger pools of domestic and international capital. Third, strengthening our developmental mandate. This includes transaction advisory services, project preparation support, infrastructure data initiatives such as creation of a data repository, and collaboration with governments, regulators, multilateral agencies and market participants.
