The National Bank for Financing Infrastructure and Development (NaBFID) on Thursday launched a partial credit enhancement (PCE) product to improve long-term capital access for infrastructure projects.
The facility can be used to ease credit risks and improve the creditworthiness of debt instruments. Department of financial services secretary M Nagaraju unveiled the product at an NaBFID event.
Nagaraju on the new PCE product
“By enhancing credit and reducing risk, PCE will unlock fresh capital for infrastructure, and reduce overuse on traditional bank lending, thereby diversifying risk across the financial system,” he said.
Under the partial credit enhancement facility, the development finance institution will offer a back-up credit line to support low-rated bonds during cash shortfalls, covering part of the principal and interest. With a guarantee from an all-India financial institution, the goal is to improve ratings, lower borrowing costs and expand infrastructure funding beyond bank loans.
In order to address the infrastructure spending requirement, India must tap into its domestic reservoirs of patient capital, specifically the funds managed by life insurance companies, pension funds and provident funds, according to a joint report by NaBFID and Crisil Intelligence. These institutions have long-term liabilities that are perfectly aligned with the extended tenures of infrastructure projects, making them ideal investors.
Report points out further need for infrastructure development
Despite the unprecedented increase in public spending for infrastructure development, India still needs to invest Rs 90-100 lakh crore between fiscals 2026 and 2030, the report said.
Overall, a cumulative debt requirement of Rs 25– 27 lakh crore over fiscals 2026-30 is expected, accounting for nearly 30% of the infrastructure capex, mainly led by the energy and road segments. “We expect banks, NBFCs and all-India financial institutions to fund ~75% of the debt requirement, while the rest would be funded via bonds and external commercial borrowings,” the report said.
The analysis indicated that the Rs 5-8-trillion funding gap in infrastructure that should come from corporate bonds can be funded by investments from life insurance, pension funds and provident funds, provided their infrastructure investments meet the relevant regulatory requirement, the report said.
Sivasubramanian Ramann, chairperson of the Pension Fund Regulatory and Development Authority, said with the RBI reducing the provisioning requirement for loans under construction projects from 5% to 1%, a revival in credit flow to stall projects is expected from October 1, once the guidelines come into effect.
“At the end of 2025, we did a back-of-the-envelope calculation and found that the NPS pool directed towards the infrastructure sector is about Rs 2.3 lakh crore, constituting about 16% of the AUM of pension funds. Of course, these are small numbers, but as we move forward, we expect to increase this,” Ramann said.