RBI Deputy Governor Urges NaBFID to Achieve Strong Credit Ratings and Self-Sustainability
M. Rajeshwar Rao, Deputy Governor of the Reserve Bank of India (RBI), emphasized the importance of the National Bank for Financing Infrastructure and Development (NaBFID) securing robust credit ratings to enhance its ability to access both domestic and international funding sources. Speaking at an infrastructure conclave hosted by NaBFID on Thursday, Rao underscored the need for the institution to develop a sustainable business model that does not rely heavily on continuous government support or regulatory concessions.
Established in 2021, NaBFID is a development finance institution dedicated to supporting infrastructure projects across India. Rao pointed out that the underdeveloped financial system has made the infrastructure sector heavily dependent on banks and non-banking financial companies (NBFCs). Despite challenges, such as non-performing assets and asset-liability mismatches, there has been positive progress with resilient NBFCs showing improvement.
Rao noted that the infrastructure sector often faces difficulties due to high initial costs and long project durations, which complicate financing efforts. Additionally, the interconnected nature of infrastructure projects can exacerbate these challenges, as the availability of one type of infrastructure often depends on complementary projects, leading to cascading effects.
He recommended an integrated approach to infrastructure financing, where projects are considered as part of a broader network but evaluated independently. NaBFID, Rao said, should play a critical role in developing the bond market and providing technical assistance for infrastructure projects. By offering partial credit enhancements and first-loss default guarantees, NaBFID can build confidence among long-term fund custodians, encouraging them to invest in the sector.
Rao also advised NaBFID to focus on building expertise in project appraisal and evaluation, as well as setting up a dedicated unit for monitoring and evaluating funded projects. On the governance front, he stressed the need for the institution to enhance its resources, attract skilled professionals, and strengthen risk management and assurance systems.
He concluded by highlighting NaBFID's potential to transform infrastructure financing in India, bridging the funding gap and encouraging private sector participation through its specialized mandate.
