News Excerpt:
The National Bank for Financing Infrastructure and Development (NaBFID) has lined up a Rs 20,000 crore credit line from multiple banks and is negotiating with multilateral agencies for long-term funds, including green climate funds for renewable energy projects.
New hope for Infrastructure development:
- NaBFID closed the financial year 2024 with Rs 1 trillion in sanctions, disbursing Rs 36,000 crore by March and Rs 45,000 crore by the end of May.
- NaBFID’s portfolio predominantly consists of renewable and traditional power generation projects, followed by roads and railways.
- The institution is also making inroads into telecom, city gas distribution, and power transmission.
- NaBFID aims to meet the Finance Minister’s ambitious target of a Rs 5 lakh crore lending portfolio within three years. By leveraging the corpus of insurance, pension, and provident funds, along with market-raised funds, NaBFID is positioning itself as a comprehensive solution to India’s infrastructure woes.
- As India’s fastest-growing economy, the success of NaBFID could mark a new chapter in infrastructure financing, paving the way for sustained economic growth and development.
Mandate and Funding:
- Its mandate includes financing infrastructure through loans and equity investments and developing long-term bond and derivatives markets.
- NaBFID's paid-up capital stands at Rs 20,000 crore, supplemented by a Rs 5,000 crore grant.
- Plans are also underway to raise external commercial borrowings in the last quarter of the current year.
Providing solutions for the past problems in infra financing:
- Historically, infrastructure financing in India has faced significant challenges.
- Development Finance Institutions (DFIs) like Industrial Finance Corporation of India Ltd and ICICI faced severe asset-liability mismatches in the 1990s when their access to cheap funds was cut off.
- The Infrastructure Development Finance Company Ltd and India Infrastructure Finance Company Ltd also struggled to sustain their operations.
- NaBFID is poised to succeed where others have failed.
- The ecosystem for infrastructure financing is evolving, and a new class of investors is emerging.
- Infrastructure projects are now viewed as a new asset class offering healthy returns, especially those that have been completed and are up for asset monetization.
Government push to infra investment:
- In October 2022, Union Minister for Road Transport and Highways Nitin Gadkari marked the retail entry through the listing of NHAI InvIT (National Highways Infra Trust) non-convertible debentures (NCDs).
- This move demonstrated the potential for retail investors to engage in infrastructure investments, with the NCDs being oversubscribed almost seven times within seven hours of their opening.
- Despite previous failures in project financing due to environmental clearances, stalled projects, and accumulating bad assets, the current ecosystem shows promise.
- The Insolvency and Bankruptcy Code of 2016 and proactive government measures in allocating resources and clearing project hurdles have created a more resilient banking system.
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