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Informist, Tuesday, Aug. 26, 2025

 

By Priyasmita Dutta and Sagar Sen

 

MUMBAI – The National Bank for Financing Infrastructure and Development is planning to sanction loans to the tune of INR 1 trillion in 2025-26 (Apr-Mar) and may raise INR 500 billion through a mix of term loans, domestic debt market borrowing and external commercial borrowing to fund it, the infrastructure financier's senior management said Tuesday. "Our disbursements may be around INR 600 billion, so that much (INR 500 billion) borrowing will be adequate," its Deputy Managing Director Monika Kalia said. 

 

"We will explore different markets for the most viable pricing, but we want to time the deal smartly... may be wait for further comments or clarity by the Reserve Bank of India on further rate cut," Kalia told Informist on the sidelines of FIBAC 2025, organised by the Federation of Indian Chambers of Commerce and Industry and the Indian Banks Association. The central bank has cut the repo rate by 100 basis points to 5.50?tween February and June, but has stayed pat since then. 

 

"Given the interest rate situation, it is tough to tell whether the domestic market is more lucrative or the dollar market, so we really want to be smart with the timing," Kalia said. Among offshore markets, she said NaBFID prefers the dollar market, given the stability and size of the investor base. She does not see the yen market as lucrative enough for external commercial borrowing. "We will need to be in the external market for another two to three years to be able to tap the yen market," she said. 

 

Separately, NaBFID Managing Director Rajkiran Rai G. told Informoist that the financier may raise $1 billion through external commercial borrowing this year. 

 

According to the company's investor presentation, NaBFID's cumulative sanctions and disbursements totalled INR 2.03 trillion and INR 747 billion, respectively, at the end of March. The managing director said that although NaBFID is approving loans in the road and warehousing sectors, the most promising infrastructure projects are emerging in renewable energy, transmission, and battery storage. "These are the areas where a lot of projects are coming up," Rai said. 

 

NaBFID, incorporated in 2021, has been primarily set up to support long-term infrastructure financing in India, including the development of bonds and derivatives markets necessary for infrastructure financing.

 

Speaking on the borrowing instruments, Kalia said the appetite for special instruments like zero-coupon bonds was lacklustre. "There is not much demand for zero-coupon bonds anymore. The last few issuances have been scrapped or under-subscribed," she said. 

 

Public sector companies need the permission of the finance ministry to raise funds through zero-coupon bonds, as the Central Board of Direct Taxes has to provide a special tax provision to allow the return on these papers to be classified as capital gains rather than interest income. Capital gains are taxed at a lower rate than corporate tax. 

 

Non-interest-bearing bonds, or zero-coupon bonds as they are popularly known, sell at a discount and do not offer any periodic interest payment. Power Finance Corp., the last public sector company to come to the market with this instrument, had in June scrapped the bonds due to low demand for paper.

 

NaBFID has already tapped the domestic market for almost INR 80 billion so far this year. Its credit book includes projects in ports, power generation, railways, renewable energy, roads, telecom, transmission and distribution, water and sanitation. 

 

Rai said NaBFID is in talks with three top multilateral agencies to set up an alternate investment fund-type mechanism in GIFT City to enable equity funding to entities. "It is in the works, but the contours are yet to be firmed up. It would be premature to give more details," he said. 

 

Rai said that there is significant potential for lending to municipal corporations, which require substantial credit, although a few lending bottlenecks remain. "Their capacity to take credit and utilise it is a bit low," he said, adding that, irrespective of the challenges, wherever there is an opportunity, NaBFID is lending. "Actually, we have already done some project financing, particularly on solid waste management and sewage water treatment, and riverfront development," he said. 

 

Rai said the issues with the municipal bodies include a lack of a proper balance sheet and credit rating. "Actually, we need to help them to structure their balance sheets well and collect their receivables well," he said. Rai also expects 400-500 municipal bodies to issue bonds over the next four to five years to raise funds for development projects. "We are seeing a lot of public-private partnership projects, particularly on sewage treatment and solid waste management," he said. 

 

In the recent past, the Securities and Exchange Board of India has actively promoted municipal bonds as a strategic tool to finance urban infrastructure and sustainable development. Finance Minister Nirmala Sitharaman had also said that the government is taking various initiatives to push municipal corporations to raise funds through the corporate debt market to boost urban infrastructure. However, municipal bond issuance activity has seen a lull after picking up considerably in late 2023.  End

 

US$1 = INR 87.58

 

Edited by Saji George Titus

 

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