NaBFID in Talks with World Bank to Strengthen Financing for Infrastructure Projects

The National Bank for Financing Infrastructure and Development (NaBFID) is in advanced discussions with the World Bank to enhance infrastructure financing by improving the credit ratings of corporate bonds. This initiative aims to lower the borrowing costs for infrastructure projects and attract greater investment into the sector.

As announced in the Union Budget 2025-2026, NaBFID has been authorized to provide a Partial Credit Enhancement (PCE) facility with a guarantee of up to 20% of corporate bonds issued by corporate entities and Special Purpose Vehicles (SPVs) of infrastructure projects.

PCE serves as a credit enhancement tool, where NaBFID offers a guarantee on debt instruments, improving their credit rating and making them more attractive to investors. This facility enables infrastructure projects to access capital markets at lower interest rates compared to traditional bank loans.

To further strengthen the PCE framework, NaBFID and the World Bank are exploring a risk-sharing arrangement.

Under this proposal, the World Bank will provide counter-guarantees to support NaBFID’s PCE facility, helping reduce NaBFID’s capital requirements. This will enable NaBFID to offer more guarantees at competitive rates, thereby improving the credit rating of corporate bonds and boosting investor confidence.

The discussions focus on determining the extent of counter-guarantees provided by the World Bank, in exchange for which a fee will be paid to the global financial institution.

NaBFID has already submitted a preliminary project report to the Ministry of Finance. The final agreement with the World Bank will be concluded once the counter-guarantee terms are settled.

This collaboration is significant in strengthening India’s corporate bond market, which has remained underutilized due to high borrowing costs and credit enhancement challenges. By partnering with the World Bank, NaBFID aims to create a more viable credit enhancement mechanism, thereby promoting long-term financing for the infrastructure sector.