The newly minted National Bank for Financing Infrastructure and Development (NaBFID), is looking at doubling its loan book annually with a strong sanctions pipeline given the government’s thrust on infrastructure, Managing Director Rajkiran Rai G told businessline.
Financing infrastructure projects is not the only mandate that NaBFID has, as it also the responsibility of developing the long-term bonds market and getting domestic insurance, pension and retirement funds to invest in key infrastructure projects.
There have been infrastructure institutions in the past, which somehow could not stay the course. What is different this time and how is NaBFID meeting the infrastructure funding challenges?
With regard to infrastructure the country has experimented with various institutions. Some were successful in particular decades and after that they vanished for various reasons. But in any country, as it evolves these things do happen. I think we are at a perfect period now where the ecosystem has evolved where this kind of institution can really make a difference. The biggest change is the way the government is looking at infrastructure funding. The way the concession agreements have evolved, there is respect for the investor, proper understanding of the issues these projects face, were not there, and we are seeing a perfect understanding from the government side and various agencies to make private investment successful and also give them decent returns. The whole ecosystem has evolved, which was not there 5 years or 10 years back. There is enough liability getting generated, which is ready to be invested. NaBFID has very robust credit appraisal system, robust risk management and credit monitoring. The institutions created earlier did not have enough inputs, we are creating one of the biggest data repositories.
A lot of global pension funds and sovereign funds are investing in Indian infrastructure assets, don’t you think that Indian retirement funds should also be investing more in infrastructure assets here?
There is an appetite, but they prioritise safety. According to the IRDAI rules, insurance companies should ideally invest 15 per cent of their corpus in infrastructure assets. They are only 9 per cent now. They say there is a lack of opportunity, so we need to create that opportunity. The corpus with insurance, provident fund and pension funds is around ₹115 lakh crore, while deposits with scheduled banks is at ₹210 lakh crore. They are already more than half of banks’ deposits and they are growing at high double digits. In the next 10 years they will be bigger than banks. Their investment avenue is government securities, but government may not issue so many bonds going forward. They are investing in our bonds but there is a limit to our bond issuances. Ultimately they will have to get into infrastructure assets.
How is your loan book looking now, what growth do you expect in future and which sectors do you have the most exposure to?
We crossed ₹1 lakh crore in sanctions in March 2024, over a 15-month period. This year we are expected to sanction another ₹1 lakh crore, so our total sanction book should cross ₹2 lakh crore by March 2025. Disbursements should be more than ₹1 lakh crore, but the book size is likely to be around ₹93,000 crore, because there will be some repayments and there will be some refinancing. Around 70 per cent of loans have a term of 15 to 25 years. We should be doubling every year because the sanctions pipeline is strong. More than half of my loan book has exposure to energy – renewable, thermal and transmission projects. It is going to remain so because last year we have done 18 GW of renewables and this year it is going to be much bigger.
Some of the big industrial houses are tapping overseas bond markets because long term bonds are not available in India. Do you think you can play a role here in developing the bond markets?
We are not only a financing institution, but part of our role is also to develop the financing ecosystem. For instance, we are coming with a partial credit enhancement product. (This is a program that helps improve credit rating of bonds issued by NBFCs, through an assurance of repayment). We are trying to create some structures for states also to encash their assets. Another strength NaBFID has is I can give a fixed rate loan. We have done one transaction for 17-years at a fixed rate. We also have 3-year and 5-year rates.