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Informist, Thursday, Sep 12, 2024

 

By Kshipra Petkar and Sourabh Kumar

 

MUMBAI – National Bank for Financing Infrastructure and Development plans to provide partial credit enhancement to bonds issued by infrastructure companies given that many such companies are just short of being top-rated, Managing Director Rajkiran Rai G. told Informist at the NaBFID Infrastructure Conclave 2024. However, he said that the cost of these products needs to come down.

 

"The time is right because there are so many assets, so many infrastructure companies which are 'A', 'A-' rated. With credit enhancement, they can become 'AA' players and insurance companies can come in or other players can come in and subscribe," Rai told Informist in an interaction.

 

Partial credit enhancement was introduced in 2015 by the Reserve Bank of India to help non-bank lenders to raise money from insurance companies and provident or pension funds, as they have a mandate to invest only in top-rated instruments.

 

Rai emphasised the need for credit enhancement of high-rated infrastructure companies so that they can tap into investors such as insurance companies. However, he raised concerns about the costs involved.

 

"So there is no player doing (partial credit enhancement) as of now. It is a very costly product at this point of time, so things have to change to make it really economical to take this forward," Rai said.

 

Rai said that by Mar 31, the apex development bank which was set up in 2021 will cross disbursements of 1 trln rupees and the outstanding book would be around 930 bln rupees.

 

"Outstanding book will be around 93,000 crs (930 bln rupees) because we also syndicate, down sell, repayments come and all that. The outstanding book is targeted to be 93,000 crs (930 bln rupees) but the disbursement will cross 1 lakh crore (1 trln rupees) by the end of this year," he said.

 

So far, NaBFID's disbursals are less than the halfway mark of its sanctioned amount, Rai said.

 

"We have a sanction book of 1.20 lakh crore (1.2 trln rupees) out of which only 50,000 crs (500 bln rupees) has been disbursed yet," Rai said. As per their annual report for 2023-24 (Apr-Mar), over 95% of the sanctions are to transport logistics and energy sector.

 

Rai said that the development finance institution has enough capital to grow comfortably at the same pace for the next 2-3 years, and may expand its loan book to 5 trln rupees by 2028-29. He said the renewable sector was among the highest funded sectors by NaBFID.

 

To fund its disbursements, NaBFID is likely to raise 530 bln rupees through bonds in the current financial year ending Mar 31, of which it has borrowed 90 bln rupees so far, he said.

 

While NaBFID was looking at issuing green bonds, Rai said "nothing is crystal clear", and that it would wait for the proposed taxonomy. In the Budget for 2024-25 (Apr-Mar), Union Finance Minister Nirmala Sitharaman said India will develop a taxonomy for climate finance to enhance the availability of capital for climate adaptation and mitigation.  End

 

Edited by Ashish Shirke

 

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