India’s Youngest Development Finance Institution Is On The Cusp Of Takeoff

India's newest development finance institution, the National Bank for Financing Infrastructure and Development is all set to take off soon, according to Chief Executive Officer Rajkiran Rai G.

The institution is nearly operational and has started reviewing potential credit opportunities, Rai told BQ Prime on the sidelines of FIBAC 2022. “NaBFID is being set up actually. We are on a deputation model…We have already started processing credit proposals."

"We are building the right structures, right now, to handle this. We are also in touch with lot if international DFIs to learn what are the best practices to be followed,” Rai said.

The teams are in place, he said, though NaBFID is still in the process of setting up the technological backdrop.

Apart from lending, NaBFID will also look at attracting investments for infrastructure projects in India. The institution with a capital base of Rs 20,000 crore from the government, is targeting a Rs 3 lakh crore of asset under management, Rai said.

“There are many infrastructure companies executing these projects, and there are many middle level companies that are really coming up,” Rai said about the potential for infrastructure investments in India. 

Over the last seven or eight years, India's infrastructure companies have displayed strong execution capabilities, ensuring that companies are able to attract the right kind of investments, he said.

However, there is a need to develop expertise over India's infrastructure lending space along with providing better products, Rai said.

“We had sufficient expertise in credit but over time for lack of a specialised institution on infrastructure financing, commercial banks started lending in their normal way," Raid told BQ Prime. "So that is why it became a plain vanilla, dead product that companies get.”

Considering the fact that infrastructure projects have a concession period of 30 years, the financing products will need to take into account the risks involved and provide the right kind of returns for investors, he said.

“The right amount of bonds, the right amount of debt and other forms of instruments need to be structured to make infrastructure viable,” Rai said.