Consistent financing from conventional funding sources, coupled with newer and more innovative methods and rising foreign investments, has supported the accelerated pace of infrastructure development. Structural reforms, along with strong institutions, have further strengthened the country’s financing ecosystem. Policy initiatives have also helped create an investor-friendly environment. Industry experts discuss current infrastructure financing trends, evolving funding mechanisms, emerging opportunities, key challenges and policy asks. Edited excerpts…
What are the key trends shaping India’s infrastructure financing ecosystem?
Anurag Dwivedi
India’s infrastructure financing landscape is undergoing a fundamental transformation, driven by the maturation of capital markets and a deliberate policy shift from over-reliance on bank lending. Several trends stand out.
First, the emergence of infrastructure investment trusts (InvITs) as a mainstream monetisation tool has been significant. We have seen an increasing number of operational road, transmission and renewables portfolios being aggregated and listed through InvIT structures, unlocking long-term patient capital from domestic and global institutional investors.
Second, the bond market – both onshore and offshore – is playing a far greater role. The Reserve Bank of India’s (RBI) revised framework for infrastructure debt funds (IDFs) and the expansion of the corporate bond market have improved tenor availability for infrastructure borrowers.
Third, blended finance structures – combining concessional capital from multilateral and bilateral development finance institutions with commercial debt and equity – are gaining traction, particularly for climate-aligned and greenfield projects.
Fourth, there is growing sophistication in project finance documentation and risk allocation. Lenders, sponsors and advisers are now more adept at structuring bespoke financing solutions that address construction, offtake and regulatory risks in a nuanced manner.
Finally, the digital infrastructure subsector – data centres, fibre networks and tower portfolios – has attracted significant cross-border capital, creating an entirely new asset class for infrastructure investors.
“A collaborative approach, with clear roles, efficient risk transfer and a supportive regulatory framework, is essential to finance India’s infrastructure at the pace and scale required.” Anurag Dwivedi
Karan Mitroo and Ankita Parasar
For decades, infrastructure growth in India was financed through annual budgetary allocations and domestic institutions which were created with that specific purpose. However, the financing landscape has changed significantly into a multi-stream ecosystem. On the one hand, we have seen scheduled commercial banks taking the lead in large infrastructure projects, on the other hand, we are seeing several non-banking financial companies (NBFCs) plugging the gap for niche infrastructure projects.
Significant funding is flowing from multilateral institutions such as the Infrastructure Finance Corporation, Asian Development Bank, Asian Infrastructure Investment Bank and New Development Bank. Additionally, India Inc. has successfully attracted substantial global debt capital through external commercial borrowings (ECBs) from several banks across Europe, the US and Japan, as well as international bond markets.
We have witnessed notable growth in credit-enhanced guarantee products, with players like GuarantCo and the National Bank for Financing Infrastructure and Development (NaBFID) providing credit enhancement to certain projects. This mechanism will improve access to capital for lower-rated borrowers and higher-risk, high-growth sectors.
With the emergence of InvITs, widely considered as a safe instrument, we have seen a steady flow of debt capital from the domestic bond market. However, further deepening of the bond market will be crucial to unlock additional layers of funding.
“SEBI has been extremely proactive in understanding industry requirements. It has revised the InvIT regulations to ease operational flexibility and provide the right impetus for the growth of InvITs.” Karan Mitroo and Ankita Parasar
Virender Pankaj
India’s infrastructure financing ecosystem is undergoing a structural transformation driven by the country’s ambitious economic growth and sustainability objectives. Infrastructure investment requirements are estimated to exceed Rs 150 trillion in the next five years, creating significant demand for long-term capital across sectors.
One of the most notable trends is the increasing diversification of funding sources. While NBFC-Infrastructure Finance Companies (IFCs) and banks continue to play a critical role, there is growing participation from specialised infrastructure financiers, domestic institutional investors, pension funds, insurance companies, sovereign wealth funds and global private capital. The financing ecosystem is becoming deeper and more sophisticated, allowing projects to access capital through different stages of their lifecycle.
Another important trend is the increasing focus on green finance, which includes sectors such as renewable energy, energy transition and climate-resilient infrastructure. Capital is progressively flowing towards solar, wind, battery energy storage systems (BESSs), transmission infrastructure, electric mobility, water and waste management projects. Sustainability considerations are no longer peripheral but have become central to investment decisions.
There is a clear evolution towards asset recycling and operational asset financing. Mature infrastructure assets with established cash flows are attracting significant investor interest, enabling developers to recycle capital into greenfield opportunities. Infrastructure investment trusts (InvITs) have emerged as effective vehicles for mobilising long-term capital.
Digitalisation, advanced risk analytics and greater project monitoring capabilities are improving underwriting standards and portfolio management practices across the sector. Together, these trends are creating a more resilient and scalable infrastructure financing ecosystem.
“India’s infrastructure ambitions will require an ecosystem-based financing approach where different pools of capital play complementary roles rather than competing ones.” Virender Pankaj
Santosh Sankaradasan
The government’s approximately Rs 111 trillion National Infrastructure Pipeline and its vision of the country becoming a $5 trillion economy requires sustained GDP growth of 9 per cent or more, supported by a multi-year expansion in capex. Annual infra capex is expected to rise to about Rs 21 trillion during 2027-31, compared to about Rs 13.8 trillion during 2022-26. Transport, power and urban infrastructure will remain important, while emerging sectors are projected to witness maximum growth.
Public investment has grown at a 15.8 per cent CAGR during 2023-26, compared to 11.5 per cent for private investment, with public gross capital formation rising from 7.4 per cent to 8.6 per cent of GDP. Government capex has focused on connectivity, logistics and urban infrastructure, with the emphasis gradually shifting from individual projects to integrated infra networks, creating opportunities in logistics parks, industrial corridors, dedicated freight corridors, inland waterways and multimodal transport systems.
Corporate balance sheets have strengthened, with median corporate gearing declining from 1.5 times in 2014-15 to 0.5 times in 2025-26. However, private capex remains cautious due to global trade and US tariff uncertainty, cheaper imports, preference for acquisitions over greenfield expansion in some sectors, uneven consumer demand and commodity-price volatility.
India’s commitment to 500 GW of renewable capacity by 2030 and net zero emissions by 2070 is creating opportunities across renewable energy, transmission, storage, green hydrogen, electric mobility and related manufacturing. Infra projects are increasingly technology-enabled and sustainability-focused, with climate resilience incorporated into their design.
Rapid urbanisation is driving demand for mass transit, water and wastewater systems, solid waste management, affordable housing and resilient urban infrastructure. Digital infrastructure is emerging as core to the economy, with data centres, fibre networks, cloud infra, 5G, digital connectivity and data sovereignty gaining importance. AI, digital services and rising data consumption are likely to accelerate.
The National Monetisation Pipeline (NMP) has institutionalised asset recycling and unlocked public sector asset value, while mature infrastructure investment trust (InvIT) and real estate investment trust (REIT) frameworks provide liquid markets for infrastructure securities.
“India’s infrastructure capex is too large and diverse for any single class of financial institution.” Santosh Sankaradasan
What have been some of the key recent policy and regulatory initiatives and their impact?
Anurag Dwivedi
The policy environment has been broadly supportive. The National Infrastructure Pipeline and the NMP continue to provide a visible project pipeline, giving financiers confidence to commit long-term capital. The Electricity Act amendment proposals and the push towards competitive procurement in the renewables sector have improved bankability by reducing offtake risk.
On the regulatory front, SEBI’s revisions to the InvIT framework – including permitting increased leverage at the trust level and broadening the definition of eligible assets – have enhanced the utility of this vehicle. RBI’s revised project finance guidelines entailed under its credit facility directions, vital relaxations in ECB norms under the Foreign Exchange Management Act and permission to Indian banks to participate in acquisition finance represent perhaps the most consequential regulatory developments over the past decade in the infrastructure and banking and finance space. Each of these regulatory developments have incentivised better underwriting discipline and encouraged a transition towards more diversified funding sources available to all sectors including infrastructure.
The introduction of the Insolvency and Bankruptcy Code and its evolving jurisprudence around infrastructure assets – including issues of lease rights, regulatory licences and the treatment of government concessions in resolution – have brought greater certainty to lenders’ recovery prospects, even if some ambiguities remain. The International Financial Services Centres Authority’s (IFSCA) framework for aircraft leasing and ship financing at GIFT City has also opened up new avenues for specialised infrastructure and transport asset financing. An enabling ecosystem, supported by the regulatory push at GIFT City, has introduced a new avenue to access the market and raise funds in the form of treasury companies. Infrastructure companies, especially in the renewables and oil and gas sectors, have shown significant interest in tapping this new avenue to raise foreign capital.
Karan Mitroo and Ankita Parasar
We have an extremely dynamic set of regulators in both RBI and SEBI, which have time and again shown how to draw a balance between promoting growth while protecting stakeholder interests and ensuring proper governance.
The dual RBI regulations on project finance and acquisition finance have been at the core of discussions in recent times. The RBI regulations on project finance have been tailored based on the central bank’s learnings from past experiences to safeguard bank money being used for under-construction projects. Similarly, taking note of the ongoing consolidation among players within the infrastructure sector, RBI has come out with robust guidelines on acquisition finance. These guidelines permit banks to fund companies for strategic acquisitions. Furthermore, the RBI guidelines on credit enhancement aim to expand the horizon of funding through this product.
In the same way, SEBI has been extremely proactive in understanding industry requirements, and has time and again revised the InvIT regulations to ease operational flexibility and provide the right impetus for growth of InvITs.
Virender Pankaj
India’s infrastructure growth story has been strongly supported by policy reforms over the past few years. The National Infrastructure Pipeline, PM Gati Shakti, the NMP and continued emphasis on public capital expenditure have collectively strengthened the visibility of the project pipeline and improved investor confidence.
Regulatory reforms by the Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI) have paved the way for attracting further investments into the sector. In the renewable energy space, policy support has enabled rapid scaling of solar and wind capacity, while production-linked incentives and grid expansion initiatives are supporting the broader energy transition agenda. There has also been a continued emphasis on attracting private and institutional capital through asset monetisation and InvIT structures. These initiatives have expanded investment opportunities for long-term investors and improved capital recycling within the infrastructure sector.
RBI’s Project Finance Directions, 2025, effective October 1, 2025, increased provisioning requirements during the construction phase from 0.4 per cent to 1 per cent. While this strengthens the resilience of the financial system, it also increases the capital consumed by lenders, potentially impacting the risk-return equation for greenfield infrastructure projects that are critical to India’s long-term growth aspirations. The directions do not seem to take into account negligible credit costs in green energy financing in India in more than a decade.
Given the distinctive risk characteristics of infrastructure assets, the sector would benefit from a more differentiated and data-driven regulatory approach. It would help if policy formulation is preceded by extensive stakeholder consultation, including participation from specialised infrastructure financiers, institutional investors, global lenders and private sector participants.
As India’s infrastructure market matures, regulatory frameworks can increasingly leverage technology, including artificial intelligence and machine learning, to analyse granular sector-level credit performance data, and transparently assess default and recovery trends.
Such an approach could enable risk-sensitive provisioning frameworks that better reflect the underlying credit quality of specific sectors and portfolios, rather than relying on uniform requirements across diverse infrastructure segments.
Santosh Sankaradasan
Recent initiatives have focused on scaling public capex, accelerating asset recycling, and mobilising private and institutional capital to build an integrated infra ecosystem. Some of the key measures include the establishment of specialised development finance institutions, the introduction of the Infrastructure Risk Guarantee Fund (IRGF) to de-risk private lending through partial credit guarantees during early project stages, and flexible asset monetisation frameworks. The PM Gati Shakti National Master Plan has strengthened interministerial coordination through a GIS-based platform integrating 16 ministries, thereby improving connectivity while reducing planning inefficiencies and land acquisition challenges. This is complemented by the National Logistics Policy, which aims to lower logistics costs and enhance supply chain efficiency.
The evolution of the Insolvency and Bankruptcy Code, National Asset Reconstruction Company Limited, Central Repository of Information on Large Credits, and the Inter-Creditor Arrangement has improved credit discipline and strengthened the stressed-asset resolution ecosystem. The Anusandhan National Research Foundation (ANRF) and the Rs 1 trillion Research, Development and Innovation Fund (RDIF) are driving R&D, innovation, entrepreneurship and deep-tech investments in strategic and sunrise sectors.
In the power sector, priorities have shifted towards firm and despatchable renewable energy and round-the-clock hybrid battery storage projects to ensure grid adequacy, while the Electricity (Amendment) proposals indicate a move towards greater market liberalisation.
Revised model concession agreements across sectors have improved risk allocation, addressing investor concerns. The Insurance Regulatory and Development Authority’s relaxation of norms to permit insurers to invest up to 20 per cent in debt issued by public limited infrastructure special purpose vehicles rated “AA” or above that have commenced commercial operations with stabilised cash flows without the requirement of any parent guarantees or net worth support, could unlock significant long-term capital.
These reforms have increased emphasis on integrated planning, asset recycling, logistics efficiency, multimodal connectivity and institutional financing. However, implementation will depend on policy certainty, faster approvals, and predictable land acquisition and coordination across central, state and local authorities to translate initiatives into bankable projects.
What are the biggest risks today for infrastructure projects? How can these be addressed?
Anurag Dwivedi
From a financing perspective, the most significant risks are threefold. First, land acquisition and regulatory clearances continue to be a persistent source of delay and cost escalation, particularly for linear infrastructure such as highways, railways and transmission lines. Despite legislative reforms, ground-level implementation remains uneven. A more robust, time-bound single-window clearance mechanism – backed by digital land records and satellite-based monitoring – would materially improve the bankability of greenfield projects.
Second, counterparty and offtake risks remain acute in certain sectors. In the power sector, the financial health of state distribution companies (discoms) and the demand-supply gap in grid infrastructure, notwithstanding UDAY and subsequent reform schemes, continues to be a concern for lenders. The contractual sanctity of power purchase agreements has been tested in several instances, and any erosion of confidence in government-backed offtake arrangements raises the cost of capital across the board. Strengthening the enforcement of contractual commitments and accelerating discom privatisation or corporatisation would help address this.
Third, the evolving regulatory environment itself can be a source of risk. Mid-cycle changes in tariff methodologies, environmental compliance requirements or concession terms create uncertainty that is difficult to price. Greater regulatory stability and the adoption of grandfathering principles for policy transitions would go a long way in reassuring long-term investors.
Karan Mitroo and Ankita Parasar
The most important factor for all stakeholders undertaking infrastructure projects is a stable policy regime. Hence, regulatory support through appropriate revisions has become the need of the hour. While change is inevitable and often necessary from a long-term perspective, the timelines for implementing these updates must give investors and lenders adequate time to adapt without hurting returns.
Further, the process of land acquisition has been a sore point across sectors and has resulted in delaying/halting several projects. Putting in place a fast and effective land acquisition process would help speed up execution of infrastructure projects. Digitalisation of land records and adopting policies such as deemed NA conversion can be initial steps to facilitate ease of land acquisition.
In recent times, weak transmission offtake specific to the renewables sector has resulted in huge curtailment issues and hence loss of power and corresponding revenues for several players.
Last but not least, although regulators have been dynamic and pro-growth, resolving a few bottlenecks could further scale up financing. For instance, InvITs are currently not permitted to access ECBs. Allowing them to do so would open new avenues for these players and provide much-needed funding to these sectors. Similarly, project finance guidelines require revision; the current mandate that 75 per cent of land must be acquired upfront for non-public-private partnership (PPP) projects has become extremely difficult to fulfil in the Indian context.
Virender Pankaj
Project execution remains the key monitorable in any infrastructure project. Delays arising from land acquisition, utility shifting, transmission bottlenecks in green energy evacuation, and variations in the approach adopted by state regulatory bodies can affect project timelines and cost structures. Although considerable progress has been made, continued efforts towards streamlined approvals and faster dispute resolution remain important.
Delays related to construction and contractor performance, supply chain disruptions and execution bottlenecks can impact project viability, particularly for greenfield developments. Strong project preparation, realistic cost estimation and robust monitoring mechanisms are critical for mitigating these risks.
Infrastructure assets are increasingly vulnerable to extreme weather events, making climate adaptation and resilience planning essential components of project design and financing decisions. Addressing these challenges requires greater focus on project readiness before financial closure, stronger contractual frameworks, improved data availability, enhanced use of technology for project monitoring and a collaborative approach among developers, lenders, investors and government agencies. This is where domain knowledge-led specialist infrastructure financiers such as Aseem can play a value adding role for banks and institutions.
Santosh Sankaradasan
Often, the biggest risk is not availability of capital, but execution risk. Land acquisition, environmental approvals, right-of-way (RoW) constraints, utility shifting and execution delays can significantly affect project timelines and costs. For instance, 749 road projects and 134 railway projects were delayed, with 35 per cent of identified issues relating to land acquisition, 20 per cent to environmental matters and 18 per cent to RoW, being among the principal causes. Power projects face similar challenges, with average commissioning delays of 17-34 months. Transmission readiness, when it lags generation, leads to cash flow stress and renewable curtailment.
Demand risk is another concern, particularly for projects dependent on traffic, user charges or commercial utilisation. Counterparty and payment risks are also significant where revenues depend on financially constrained state utilities or public sector entities. These risks require better project preparation before financial closure, standardised detailed project reports, realistic demand assessments, stronger contractual frameworks, faster clearances, stronger monitoring and clearer allocation of risks to the party best positioned to manage them.
PM Gati Shakti-linked monitoring could be strengthened via participation from banks and financial institutions, joint working groups and data-driven early warning systems. Standardised concession agreements and faster dispute resolution, including arbitration, can strengthen contract sanctity. Partial credit guarantees from government-backed entities such as India Infrastructure Finance Company Limited (IIFCL) and NaBFID can address counterparty credit concerns. The priority must be to create projects that are genuinely bankable and investment-ready, not merely approved.
Which infrastructure sub sectors are expected to attract the most capital over the next five years, and which will remain difficult to finance?
Anurag Dwivedi
Renewable energy – including solar, wind, hybrid and BESS – will continue to attract the lion’s share of private capital, underpinned by India’s ambitious climate commitments and increasingly competitive tariffs. Green hydrogen is an emerging area of interest, though it remains at a pre-commercial stage for most financing purposes. Digital infrastructure, comprising data centres, fibre-to-the-home networks and 5G tower roll-outs, is another subsector that is drawing significant institutional and private equity capital, given the strong demand fundamentals.
Urban infrastructure – metro rail, water supply, and sewerage and waste management – presents a mixed picture. While the need is enormous, the revenue models in many of these subsectors remain dependent on government viability gap funding (VGF) or annuity-based concessions, which limits the pool of willing private financiers. Similarly, the railway sector, despite large public investment, has yet to develop a robust framework for private participation in core rail operations, making it difficult to attract commercial project finance at scale. Social infrastructure – healthcare and education facilities – faces analogous challenges in establishing bankable revenue streams absent government support. Other sectors that have a huge potential, but with limitation in accessing capital, are smart metering and pubic e-mobility. Both these sectors have seen a lukewarm response from lenders and investors in the wake of challenges in implementation (in the case of smart metering) and weak financial health of urban local bodies (in the case of public e-mobility).
Karan Mitroo and Ankita Parasar
While there is huge growth potential across sectors, given the sheer size and national targets, the “two Rs” – renewables (including battery storage) and roads – are poised to attract maximum capital over the next five years. We are also seeing significant momentum in transmission assets, data centres, electric vehicles (EVs) and green hydrogen (although it is at a nascent stage).
While there are ample funding avenues available for most prominent infrastructure sectors, segments like waterways, water and sanitation, including solid waste management, and certain elements of sports and tourism infrastructure may find it more challenging to attract capital.
Virender Pankaj
We expect the energy transition ecosystem to attract the largest share of capital over the next five years. Sectors like renewable energy generation, BESSs, green hydrogen, electric mobility infrastructure, water sanitisation, transmission networks and related supply chains are likely to see sustained investment momentum as India advances its decarbonisation objectives while meeting growing energy demand. Increasing data consumption and AI are likely to lead to rapid data centre roll-outs and capacity expansion.
The transportation sector should rapidly electrify and move away from fossil fuels whose availability is impacted by geopolitical fissures and this is an area of interest for us at Aseem. As renewable energy penetration increases, substantial investment will be required to strengthen evacuation networks, improve grid reliability and support interstate power flows. Urban infrastructure is another area with significant potential. Investments in water supply, wastewater treatment, waste management and urban green mobility are expected to gain momentum as cities expand and sustainability considerations become more prominent.
Projects with evolving business models, uncertain revenue frameworks or limited operating track records may require innovative financing structures and greater risk-sharing mechanisms to attract large-scale private capital. Overall, capital will increasingly gravitate towards sectors that offer long-term visibility, stable cash flows, strong policy support and alignment with sustainability objectives.
Santosh Sankaradasan
Infra sector capex is expected to reach about Rs 105 trillion over 2027-31, compared to about Rs 69 trillion during 2022-26. Transport and urban infrastructure, with a capex of about Rs 42.5 trillion and about Rs 11.5 trillion respectively during 2027-31, will remain key areas, driven by urbanisation, sustainable mobility, supply chain efficiency and lower logistics costs. Roads and highways, particularly through InvIT structures and toll-operate-transfer concessions under NMP 2.0, will continue to attract institutional capital. Ports and logistics, supported by the Sagarmala programme, offer compelling opportunities. Airports are also likely to see continued private interest following the successful privatisation/leasing of fourteen Airports Authority of India airports under the PPP model. Urban mass transit, particularly metro rail, will attract financing, although returns remain dependent on government support.
Power and energy transition could be the next major area, with a capex of about Rs 37 trillion during 2027-31, driven by the renewable capacity target of 500 GW (up from 300 GW) by 2030 and net zero by 2070. Solar, wind and hybrid projects, supported by storage and transmission networks, can offer predictable cash flows with creditworthy counterparties such as Solar Energy Corporation of India Limited.
Digital infrastructure and emerging sectors including data centres, semiconductors, fibre networks, EV, defence and related assets could see a capex of about Rs 10 trillion during 2027-31. Data centre capacity is expected to grow sixfold from 1.5 GW to 9 GW by 2030, while 12 semiconductor projects worth about Rs 1.6 trillion have already been approved.
Projects with uncertain cash flows, weak counterparties, unresolved land or regulatory issues, governance concerns and limited revenue generation or cost pass-through capacity will remain difficult to finance. Power distribution continues to face challenges such as state discom losses and political interference in tariff setting. Water and sanitation face viability issues due to inadequate user charges, while healthcare and social infrastructure lack established concession frameworks and face revenue unpredictability.
Going forward, how do you see the optimal division of roles evolving between banks, specialised infrastructure financiers and institutional investors to finance India’s growing infrastructure needs? What should be the key priorities?
Anurag Dwivedi
The financing of India’s infrastructure ambitions – estimated at well over $1.5 trillion for the next decade – cannot be met by banks alone. The optimal model, in my view, involves a layered ecosystem.
Banks and specialised infrastructure financial institutions and NBFCs such as NaBFID, IREDA, PFC and REC should continue to play the anchor role in construction phase financing, where their credit assessment capabilities and ability to manage project-level risks are most valuable. However, once projects reach operational stability, the emphasis should shift to refinancing through the bond market, InvITs and institutional investors – insurance companies, pension funds and sovereign wealth funds – which are better suited to hold long-duration, yield-generating assets.
The key priorities should be, first, deepening the corporate bond market for infrastructure issuers, including through credit enhancement mechanisms and a more active role for institutions such as NaBFID in performing their developmental role; second, broadening the investor base by enabling greater participation of domestic insurance and pension funds in infrastructure debt and equity, with suitable regulatory calibration of investment limits and risk weights; third, encouraging the development of a secondary market for project finance loans, allowing banks to recycle capital more efficiently; and fourth, strengthening the ecosystem of independent engineers, credit rating agencies and legal advisers to improve the quality and consistency of project appraisal and documentation. A collaborative approach – with clear roles, efficient risk transfer and a supportive regulatory framework – is essential to financing India’s infrastructure at the pace and scale required.
Karan Mitroo and Ankita Parasar
As mentioned above, we have seen that funding has expanded across the entire spectrum of banks, specialised infrastructure financiers, and institutional investors (both domestic and foreign).
While banks, multilateral institutions and specialised infrastructure financiers continue to support and fund large-scale infrastructure projects, we have seen NBFCs and IDFs participating in such fundings, and also solve the problem of certain niche sectors like captive renewables.
However, to scale beyond this foundation and attract other sources of financing, domestically and globally, strengthening the corporate bond market is an absolute must.
Virender Pankaj
The infrastructure financing market offers a compelling case for the role of specialised financial institutions. While banks remain important providers of capital, the top 10 NBFCs today account for roughly 55 per cent of infrastructure financing, compared to 45 per cent by the banking sector as a whole. Of these top NBFCs, seven are NBFC-IFCs, reflecting the importance of sector-focused expertise in evaluating and financing complex infrastructure projects.
However, the limited presence of privately managed infrastructure financing institutions is a matter that merits attention.
Aseem currently stands as the only privately managed dedicated NBFC-IFC, underscoring the need for policies and regulatory frameworks that encourage the emergence of more specialised private sector participants.
India’s infrastructure ambitions will require an ecosystem-based financing approach where different pools of capital play complementary roles rather than competing ones. While public investment will continue to provide the foundation for infrastructure creation, the scale of India’s development ambitions necessitates significantly greater participation from private and institutional capital.
Achieving this will require concerted effort to reduce execution risks through faster approvals, streamlined land acquisition processes and greater regulatory certainty. Equally important is the development of a mature PPP ecosystem characterised by standardised concession frameworks, transparent risk allocation, effective payment security arrangements and efficient dispute resolution mechanisms.
Together, these measures can enhance project viability, improve capital attraction and support sustained infrastructure growth.
The key priority going forward should be creating a seamless financing continuum across the project life cycle, from development and construction to stabilisation and long-term ownership.
This will require stronger project preparation, greater use of capital market instruments, continued policy stability and mechanisms that attract larger pools of domestic and international long-term capital.
Santosh Sankaradasan
India’s infrastructure capex, estimated at about Rs 105 trillion over 2027-31, is too large and diverse for any single class of financial institution, requiring a broader financing architecture leveraging each institution’s comparative advantages.
Banks will remain central to infra financing, supported by cleaner balance sheets and multi-year low/non-performing assets. Asset and liability management constraints make them suitable for shorter-tenor construction loans, early-stage requirements, working capital and projects with relatively predictable cash flows.
Their monitoring capabilities and relationship networks add maximum value during the construction phase, after which assets should be refinanced or sold down to longer-term investors.
Specialised infrastructure financiers such as NaBFID, IIFCL and PFC/REC should provide longer-tenor funding, subordinated debt, refinancing, takeout financing, credit enhancement and innovative risk-sharing structures.
They can develop expertise in complex greenfield projects and emerging sectors such as green hydrogen, pumped hydro, and nuclear power, where commercial lenders may have a limited risk appetite.
Institutional investors, including insurance companies, pension funds, the Employees’ Provident Fund Organisation and sovereign funds are best positioned to provide patient, long-duration capital and hold operationally stable projects through InvITs and long-dated bonds. Enabling policies, including higher investment limits and eased rating/concentration norms, can also facilitate greater participation.
The objective should be a financing lifecycle, rather than one institution funding a project from construction to maturity. InvITs, asset monetisation platforms, securitisation, pass-through certificates and bond markets can transfer mature assets to long-term investors, allowing banks to recycle capital into new projects.
India needs a bankable project pipeline supported by single-window clearances and an enabling policy framework. Debt capital markets must deepen through credit enhancement and greater institutional participation, while asset recycling should accelerate through formal exit routes.
Innovative structures such as securitisation, subordinated and mezzanine debt, bridge finance, blended finance and acquisition finance should be adopted. Stronger risk-sharing mechanisms such as operationalisation of the IRGF, VGF and other credit-enhancement structures can improve bankability and attract domestic and international capital. R&D initiatives supported by the RDIF and overseen by the ANRF can act as the core engine for deep tech and emerging sectors.
If these sources of capital can operate as complementary rather than competing, India can create a sustainable investment ecosystem. The next infrastructure cycle will not simply be about building more, but about building better, financing smarter and recycling capital faster.
