NHAI Declares Updated Rate for Q4 FY 2025-26 for HAM Projects

In a move to standardize the financial framework governing Hybrid Annuity Model (HAM) projects, the National Highways Authority of India (NHAI) has issued Policy Circular bearing reference no. 8.4.52/2025 dated October 6, 2025, specifying the applicable interest rate under Clause 23.6.4 of the Model Concession Agreement (MCA) for HAM projects dealing with Annuity Payments during Operation Period. This periodic declaration serves as a key financial benchmark impacting payments linked to project completion costs across all ongoing and upcoming HAM concessions. 

Background: Under the HAM model, the Authority pays the concessionaire a fixed annuity linked to project completion, along with interest on the reducing balance of the completion cost. As per Clause 23.6.4 of the amended MCA, the applicable interest rate is defined as:

“Interest shall be due and payable on the reducing balance of Completion Cost at an interest rate equal to the average of one-year MCLR of top five Scheduled Commercial Banks plus 1.25%.”.

To ensure transparency and consistency, the Authority annually declares the list of these top five Scheduled Commercial Banks based on their balance sheet size as reflected in their published annual reports, while the applicable rate is updated quarterly based on prevailing MCLRs.

Declared Interest Rate for October–December 2025: For the period from October 1, 2025, to December 31, 2025, NHAI has identified the following five Scheduled Commercial Banks for the computation of the applicable rate:

The average MCLR of these of these banks works out to 8.67% and with the prescribed margin of 1.25%, the effective interest rate for HAM projects stands at 9.92% per annum for the October–December 2025 quarter.

Future Review and Applicability: The next review of eligible banks will take place on September 1, 2026, following which the updated interest rate will be published at the commencement of each subsequent quarter. This ensures that the rate remains aligned with current market conditions and financial trends.

This structured, formula-based mechanism marks a significant shift away from discretionary methods of interest computation, thereby enhancing financial predictability within HAM contracts. By anchoring the rate to the MCLR of leading commercial banks, NHAI ensures that interest payments on completion-cost balances remain market-reflective, transparent, and uniform across projects.

Through such standardized financial parameters, NHAI continues to streamline fiscal operations within HAM projects, reinforcing investor confidence and ensuring that the hybrid annuity framework remains both stable and responsive to evolving market realities.