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Informist, Tuesday, Sept. 1, 2026

 

By Priyasmita Dutta and Sagar Sen

 

NEW DELHI – State-owned non-banking financial companies have proposed a framework to the finance ministry for redirecting India's large pool of retail savings into the infrastructure sector, a senior government official said. The NBFCs, particularly infrastructure financiers, also proposed a broader framework for raising global capital, the official said.

 

These suggestions were made at the PSB Confluence event held last month, where the NBFCs also urged a periodic review of the 'harmonised list' of infrastructure sectors and greater involvement throughout the life cycle of government projects they finance, a second official told Informist. 

 

"The infrastructure sector NBFCs, which assume an important role in India's rising infrastructure development, can benefit from the huge pool of retail investments in India," the first official said. The NBFCs sought a framework to allow retail participation in the sector through Infrastructure Investment Trusts and open-ended Alternative Investment Funds, both of which would require regulatory changes.

 

These instruments attract private capital into infrastructure financing through equity investments, thereby helping to share investment risks. Infrastructure Investment Trusts, or InvITs, are pooled investment vehicles regulated by the Securities and Exchange Board of India. They own and manage operational infrastructure assets like highways, power transmission lines, and solar parks. Alternative Investment Funds, or AIFs, on the other hand, are privately pooled investment vehicles, also regulated by SEBI, that collect funds from high net-worth investors to invest in alternative assets

 

Retail investors generally stay away from InvITs because of their complex structure and from open-ended AIFs because of the high minimum investment requirement. SEBI mandates a minimum investment of INR 10 million per investor for open-ended AIFs. "Unless these instruments are easily available for retail investors, they cannot evolve into a steady stream of investments," the official said. 

 

Allowing retail investment in the infrastructure sector through InvITs and AIFs will also help diversify retail investments across different asset classes, given the current heavy reliance on equities and mutual funds. "The NBFCs proposed that InvITs can also be treated in a similar way as mutual funds treat stocks... There can be a basket of InvITs that an investor can choose," a second official said. India's mutual fund industry has grown steadily in recent years, with net inflows reaching INR 2.36 trillion in July. The industry's total assets under management were INR 85.76 trillion as of Jul. 31. 

 

The suggestion was part of the infrastructure financiers' broader pitch for a more streamlined framework for raising capital. "The large pool of funds available domestically will cut reliance on overseas markets, which will help save other costs like hedging costs," the official said. Currently, NBFCs conduct due diligence individually and assess markets that are attractive at the time, but infrastructure NBFCs lack a cohesive, comprehensive fundraising framework. 

 

The infrastructure financing NBFCs that participated in the PSB Confluence included REC Ltd., Power Finance Corp. Ltd., National Bank for Financing Infrastructure and Development, India Infrastructure Finance Co. Ltd., among others. All these state-owned companies have raised funds from foreign markets over the last few years, with a particular focus on the dollar and yen markets.

 

The NBFCs also requested the finance ministry to periodically update the harmonised list of infrastructure sectors to ensure financing flows to all infrastructure sectors, especially sunrise sectors. The is prepared by the Department of Economic Affairs, and its broad categories include transport and logistics, energy, water and sanitation, communication, social, and commercial infrastructure. 

 

"There is a need to refine this list from time to time to ensure every corner of the infrastructure spectrum is covered," the financiers told the ministry. "Even within sectors, such as transport and logistics, there is a need to add more sectors and reprioritise which sub-sectors must receive more financing," the companies said. This approach will not only secure capital flows but also ensure the sustainability and competitiveness of long-term development projects, the second official said. 

 

According to the official, these infrastructure financiers also said they should be part of the government's periodic consultation and stock-taking process. Prime Minister Narendra Modi chairs the PRAGATI meeting – a platform for Pro-Active Governance and Timely Implementation of various projects. At last week's meeting, Modi reviewed six key infrastructure projects across the railway, road and power sectors in nine states, with a cumulative cost of more than INR 300 billion. 

 

Most of these projects are financed by PSU NBFCs, the official said. Therefore, the companies argued that participating in the review meetings would give financiers an opportunity to suggest the steps needed at each stage of a project's life to maximise the benefits of the available financing. "This will ensure funds are well utilised," the official said.

 

The finance ministry has taken all the suggestions on board and will deliberate on them before taking any action, the first official said. "PSB Confluence was a constructive platform to hold such discussions; we are hopeful positive outcomes will come from these," the official said.  End

 

Edited by Saji George Titus

 

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