Indian Railway Finance Corporation (IRFC) is exploring new business opportunities including a diversification of its lending portfolio, given its sharply reduced role as financier for Indian Railways’ rolling stocks and other projects.
The company is evaluating options to lend to companies and sectors which have forward and backward linkages with the railways, said an official.
The state-run company’s core business has been to raise money from domestic and overseas markets to finance rolling stock acquisitions and lease out these to the transporter, garnering rental incomes in the process.
Since Indian Railways has not sought fresh funding from IRFC since FY24 as part of a plan to cut its indirect debt burden, IRFC’s business model has come under pressure.
“The funding through IRFC which used to come under extra budgetary resources (EBR) has stopped since FY24. Over the past few years, the ministry of railways has been spending on capex through budgetary support which has grown to Rs 2.65 lakh crore in FY26. This has impacted the income growth for IRFC.
Last year, IRFC told a parliamentary panel that the company has “developed a detailed credit policy duly approved by the board and is in the process of establishing a business development division with requisite skill set.”
In FY26, the railways is expecting 3.78% (or Rs 10,000 crore) of the total capex to be generated from public-private partnerships which falls under EBR.
Experts said that the diversification of lending portfolio will open new growth avenues for IRFC. “The new revenue streams would help company grow its revenues at a faster pace,” the official said.
In fact, the parliamentary panel recommended that the government should evolve a mechanism through which IRFC can finance projects of other ministries and organisations who can leverage IRFC’s good standing in the world financial market as an Indian premier NBFC (non-banking finance company).
To optimise its borrowing cost, IRFC taps both domestic and international financial markets. For instance, as on December 2024, IRFC had an outstanding foreign currency borrowing portfolio of over $9 billion comprising of foreign currency loans of $5.76 billion and offshore bonds of $3.25 billion.
Over the years, IRFC has funded Indian railways with Rs 5.5 lakh crore for its various infrastructure projects. Though the company doesn’t have any control on the deployment of funds that it provides to the railways, since the finance is provided by way of lease, the ownership of the assets remains with IRFC. Despite no fresh funding to railways, IRFC has reported over 19% CAGR (compounded annual growth rate) growth in revenues.
