Nabfid holds talks with the World Bank to promote infrastructure financing

New Delhi: A senior official said the National Bank for Financing Infrastructure and Development Financing (NABFID) is holding senior talks with the World Bank to help reduce the cost of financing infrastructure projects.

Both entities will have credit risk and improve the rating of corporate bond products. The collaboration will leverage credit enhancement facilities to increase credibility and reduce borrowing costs for infrastructure companies.

“We are talking to the World Bank to share the credit risks associated with some of our Credit Enhancement (PCE) facilities targeting the infrastructure sector. We are entitled to guarantee up to 20% of corporate bonds, which will help these issues mobilize funds at lower infrastructure development costs.”

The union budget for FY26 allows NABFID to provide PCE facilities for corporate entities and dedicated vehicles (SPVs) of infrastructure projects. Essentially, Nabfid will guarantee up to 20% of such bond problems. The facility is designed to increase the credit rating of infrastructure bonds by one or two.

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“For our assurance, the World Bank’s support will further strengthen our capital allocation, thus making us competitive in terms of the price of PCE products. The conversation with the World Bank now is the amount they are willing to violate the warranty for 100% or less. We will pay for support for credit enhancement services,” Jebaraj added.

A spokesperson for the Ministry of Finance and the World Bank did not respond to an email inquiry.

Financing gap

The move comes as India’s efforts to bridge the infrastructure financing gap exceed 5% of GDP, even as it strives to become a $300 trillion economy by 2047. Despite soaring public spending, private capital remains largely untapped, with largely untapped investors such as insurance and pension funds, for example, allocated only 6% of the portfolio.

Those aware of the matter said that working with the World Bank will strengthen NABFID and reduce its capital requirements for PCE. He said this will help financial institutions secure more bonds and lower their guarantee fees, which will encourage more companies to take advantage of the product.

“The partnership will enhance (Nabfid) capital, allowing more bonds, lower fees and making PCE more attractive to investors,” the person said on anonymous condition.

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To be sure, the high capital requirements and long timeline of infrastructure projects prevent traditional lenders, thus widening the financing gap. Strengthening the corporate bond market is key to freeing up funds, but high borrowing costs often keep many investors away.

Overcome obstacles

NABFID’s PCE facility is designed to change this problem by improving bond ratings and making corporate bonds a viable funding option for infrastructure.

NABFID has submitted a preliminary project report (PPR) to the Ministry of Finance to work with the World Bank and will reach an agreement after obtaining a partial credit enhancement (PCE) provided by Nabfid, Nabfid, Nabfid, NabFID. The person quoted above said.

Credit enhancements involve providing guaranteed lenders to improve the credit rating of bonds issued by companies, allowing them to obtain funds from the bond market on better terms. The lender must put capital aside to increase credit, depending on the bond’s rating.

Venkatakrishnan Srinivasan said NABFID’s collaboration with the World Bank aims to improve the credit rating of infrastructure corporate bonds through its PCE facilities, improve market access for lower-level issuers, reduce reliance on bank loans, and strengthen the Indian corporate bond market.

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“Credit enhancement has long been a powerful tool in the fixed income market, helping competitive issuers access suboptimal issuers. By providing credit enhancement (to improve bond ratings through multiple grades), PCE facilities can grant large amounts of liquidity to institutional investors such as insurance companies, businesses and supply companies of pension funds and supply institutions, as well as typical businesses, and typical corporate competition that can free them up.

“The World Bank’s support may be a catalyst for expanding PCE adoption. The anti-guarantee of the Multilateral Development Bank (MDB) will reduce the enhanced cost of credit, making bonds a more viable alternative to traditional project loans. Given the long-term nature of infrastructure financing, the long-term nature of infrastructure financing, can enable the raising of the PCE framework to increase bonds to compete projects, compete projects, match projects, match projects, and interact.

Srinivasan added that for NabFID’s successful credit enhancement program, key challenges must be addressed, including regulatory adjustments to improve adoption, optimized guarantee costs to increase affordability, and ensure that PCE-backed bonds achieve meaningful rating upgrades to enable institutional secondary market liquidity through higher investors and structured bonds, thus enabling institutional market upgrades.