State-run Indian Railway Finance Corporation (IRFC) has plans to sanction loans to the tune of Rs 3 lakh crore by 2030, with the disbursements estimated at 70% of that amount, Chairman and Managing Director (CMD) Manoj Kumar Dubey told FE. The company is looking to fund 20 large infrastructure projects with an average ticket size of Rs 15,000 crore each.
“We are getting significant business from government agencies. The national infrastructure pipeline has projected an investment of about Rs 25 lakh crore for each sector and this presents a large opportunity for us,” the CMD said.
In FY26, IRFC disbursed around Rs 35,000 crore, of which Rs 25,000 crore went into refinancing and Rs 10,000 crore for newly sanctioned projects. Dubey said the FY26 disbursement target of Rs 30,000 crore had been surpassed due to a robust demand for funds.
IRFC 2.0
Under IRFC 2.0 which entails funding of sectors with linkages to the railways, the company diversified by lending to projects of NTPC, IOCL and Coal India. The diversification gives IRFC an opportunity to improve its net interest margins. The average margin on non-railway business is typically 100-120 basis points (bps) as compared to 40 bps in the case of railways.
IRFC’s strength, Dubey explained, lies in its zero non-performing assets (NPA) policy which not only helps it raise fund at lower rates but also makes it competitive vis-a-vis NBFCs. “Our cost of borrowing is around 6.5%, which is lower than the G-sec rate.
Being a zero-NPA entity
Being a zero-NPA entity is not just a tag but a business proposition and helps us offer better rates than other lenders,” he said. He added IRFC’s loans are priced at least 100 bps lower than loans from other lending institutions. The reason for zero NPA, as per Dubey, is a strict policy to fund only government projects.
“I will not go for an asset where there is even little chance of NPA. My core competence is to appraise government assets. If we have expertise in the government funding, and we are getting significant business from the government, which is also risk free, there’s no need to fund the private sector,” he said.
Dubey said IRFC is raising foreign-currency funds in dollars and the yen, as that is cheaper. “Right now we are fine borrowing in yen but we are also open to dollar borrowings. Under IRFC 2.0, we are hedging all the ECBs within a month. Even after the hedging cost, it’s still cheaper than the rates in the domestic market,” Dubey said.
In February, it raised JPY-equivalent $400 million as an external commercial borrowing (ECB) from a consortium of Sumitomo Mitsui Banking Corporation (SMBC) and MUFG Bank. Previously in December, it had raised JPY-equilavent $300 million.
IRFC’s focus in FY27 is going to on the metro project financing. There are about dozens of metro projects sanctioned by the ministry of housing and urban affairs with some of them still in the pipeline or at the design stage.
“The discussions are going on with multiple metro rail authorities. We can fund these projects on our own or through co-lending with institutions like World Bank. Typically, a metro project is Rs 10,000 crore, and given our balance sheet size, we can comfortably fund these projects,” Dubey said.
Additionally, the PSU is looking at participating in East-West dedicated freight corridor and seven bullet projects which were announced in FY27 budget.