India’s ambitious push for large-scale infrastructure growth may soon get a major financing cushion. The government is working on a plan to launch a Rs 2 billion risk guarantee fund aimed at reducing uncertainty for investors and developers, according to a report.

The fund is designed to give confidence to lenders and private players by covering risks that go beyond commercial considerations. The proposed fund will primarily address losses that arise due to factors such as policy changes, land acquisition delays, or environmental clearances. It will not cover commercial risks but will protect project developers from uncertainties outside their control. The move is expected to encourage banks and financial institutions to increase credit exposure to new infrastructure projects, the news report said.

The National Credit Guarantee Trustee Company (NCGTC) is likely to manage the facility. Once operational, it will underwrite development risks and enable smoother project financing. Talks are currently underway with both public and private sector financial institutions. The government will provide the initial funding for the scheme. Meanwhile, the National Bank for Financing Infrastructure and Development (NaBFID) has been tasked with submitting its recommendations within two weeks, the news report said.

India’s infrastructure development demands massive funding — estimated at $4.5 trillion by 2040 — to sustain economic growth. For 2025-26, the Centre has already set aside Rs 1.1 trillion, or 3.1 per cent of GDP, as capital expenditure.

In this context, the Ministry of Finance has been holding meetings with stakeholders to explore innovative financing solutions. On Thursday, financial services secretary M Nagaraju chaired discussions on addressing bottlenecks in infrastructure funding, including the proposed guarantee mechanism.