NaBFID in Advanced Talks with World Bank to Lower Financing Cost

11 Mar 2025 CW Team

Key Developments Credit Risk Sharing: The World Bank will share a portion of credit risk associated with NaBFID’s Partial Credit Enhancement (PCE) facility. Boosting Bond Market Access: This partnership will improve credit ratings of infrastructure bonds, making them more attractive to institutional investors. Lower Borrowing Costs: Enhanced ratings will help infrastructure firms access funds at more competitive rates. PCE Facility Expansion: NaBFID, under the FY26 Union Budget mandate, can guarantee up to 20% of corporate bonds issued for infrastructure projects. Financial Stability: The World Bank’s counter-guarantees will reduce NaBFID’s capital requirements, allowing it to provide more guarantees and lower fees. Why This Matters India is addressing an infrastructure financing gap exceeding 5% of GDP while targeting a $30 trillion economy by 2047. The corporate bond market remains underutilised due to high borrowing costs, making credit enhancement crucial.

Overcoming Challenges To ensure the success of NaBFID’s PCE initiative, key areas to address include:

Regulatory adjustments to improve adoption. Optimizing guarantee costs to enhance affordability. Ensuring rating upgrades that attract institutional investors. Boosting secondary market liquidity for infrastructure bonds. The Road Ahead NaBFID has already submitted a preliminary project report to the Finance Ministry. The deal with the World Bank will be finalised once counter-guarantee terms are agreed upon.

By strengthening the corporate bond market, this initiative is set to reduce reliance on traditional bank lending, ensuring long-term, stable financing for India’s infrastructure growth.

The National Bank for Financing Infrastructure and Development (NaBFID) is in advanced discussions with the World Bank to reduce borrowing costs for infrastructure projects by enhancing credit ratings of corporate bonds and sharing credit risk. Key Developments Credit Risk Sharing: The World Bank will share a portion of credit risk associated with NaBFID’s Partial Credit Enhancement (PCE) facility. Boosting Bond Market Access: This partnership will improve credit ratings of infrastructure bonds, making them more attractive to institutional investors. Lower Borrowing Costs: Enhanced ratings will help infrastructure firms access funds at more competitive rates. PCE Facility Expansion: NaBFID, under the FY26 Union Budget mandate, can guarantee up to 20% of corporate bonds issued for infrastructure projects. Financial Stability: The World Bank’s counter-guarantees will reduce NaBFID’s capital requirements, allowing it to provide more guarantees and lower fees. Why This Matters India is addressing an infrastructure financing gap exceeding 5% of GDP while targeting a $30 trillion economy by 2047. The corporate bond market remains underutilised due to high borrowing costs, making credit enhancement crucial. Overcoming Challenges To ensure the success of NaBFID’s PCE initiative, key areas to address include: Regulatory adjustments to improve adoption. Optimizing guarantee costs to enhance affordability. Ensuring rating upgrades that attract institutional investors. Boosting secondary market liquidity for infrastructure bonds. The Road Ahead NaBFID has already submitted a preliminary project report to the Finance Ministry. The deal with the World Bank will be finalised once counter-guarantee terms are agreed upon. By strengthening the corporate bond market, this initiative is set to reduce reliance on traditional bank lending, ensuring long-term, stable financing for India’s infrastructure growth.

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