The National Bank for Agriculture and Rural Development (NABARD) and the National Bank for Financing Infrastructure and Development (NaBFID) have signed an initial memorandum of understanding to strengthen collaboration in financing infrastructure projects with significant rural impact. According to The Economic Times, the MoU provides a framework for joint financing, knowledge sharing and development of innovative financing solutions, with a focus on expanding access to long-term, competitively priced finance for projects that can strengthen rural infrastructure and value chains. The partnership aims to cover Public Private Partnership (PPP) projects and agri-value chains as well as infrastructure with strong rural linkages, with key areas including water and sanitation, irrigation, post-harvest storage and cold-chain facilities, terminal markets, rural roads and bridges, warehousing and compressed biogas.
NaBFID, India's dedicated infrastructure lender set up under the 2021 Act, has demonstrated rapid growth since beginning operations in December 2022. According to reports from Moneycontrol, the bank's total assets expanded from ₹27,315 crore in March 2023 to ₹55,129 crore in March 2024 and ₹83,210 crore in March 2025, with projections reaching approximately ₹1,44,472 crore by March 2026. The loan book has shown even more dramatic growth, climbing from ₹9,754 crore in March 2023 to ₹35,342 crore in March 2024 and ₹56,620 crore in March 2025, with projections of ₹1,02,711.81 crore by March 2026 - roughly doubling in a single year. The bank is now expanding beyond traditional lending, as reported by Moneycontrol, with Managing Director Rajkiran Rai announcing plans to push the partial credit enhancement facility across other single-A rated infrastructure firms, starting with a small deal in Ludhiana that successfully raised bond ratings from middling A to AA.
The bank's financial metrics show strong profitability growth, with net profit scaling from ₹1,046 crore in FY23 to ₹3,037 crore in FY26, representing a 39% year-on-year increase. As reported by Moneycontrol, the capital adequacy ratio reached 73.35% in FY25, significantly above the regulatory requirement, though it moderated to 44.22% by March 2026 as the balance sheet scaled up. New Delhi maintains complete ownership of NaBFID, having seeded it with ₹20,000 crore of paid-up equity plus a ₹5,000 crore interest-free grant, against an authorized capital base of ₹1 lakh crore. The government also provides a ten-year income-tax holiday, with the CBDT granting statutory tax certainty for NaBFID's proposed ₹20,000 crore, ten-year zero-coupon bond. In a significant development, the CBDT provided statutory tax certainty for the bond even before launch in July 2025, demonstrating strong government support for the institution's market-building initiatives.
NaBFID's funding strategy has shifted significantly, moving from pure equity funding during its first six months to increased debt securities and bank borrowings. According to Moneycontrol reports, debt securities grew from ₹19,668 crore in March 2024 to ₹37,190 crore in March 2025, while bank borrowings more than doubled to ₹11,934 crore. The gearing ratio increased from 0.89x to 1.57x in a year and reached approximately 20.56% by December 2025. The bank plans to raise up to ₹70,000 crore this year, including its first overseas bonds and external commercial borrowings, as reported by Moneycontrol. This funding diversification reflects the bank's transition from a development finance institution to a market-building infrastructure lender.
Despite strong sanction growth, there remains a significant gap between approved loans and actual disbursements. As reported by Moneycontrol, cumulative sanctions increased from ₹18,560 crore in March 2023 to an estimated ₹3.03 lakh crore by December 2025, while disbursements reached only ₹74,748 crore against ₹2.03 lakh crore sanctioned as of March 2025 - approximately 37% utilization. The gap has improved gradually to roughly ₹1.09 lakh crore by December 2025 against over ₹3 lakh crore committed. Some of this lag is structural, since infrastructure loans are typically drawn in tranches, but it also means the eye-catching growth numbers describe promises more than money actually deployed on the ground. CareEdge Ratings has explicitly flagged the loan book as "untested," warning that a sustained gross NPA ratio above 5% would trigger a downgrade, though NaBFID reported nil gross NPAs through FY24 with no borrower rating slippages. Infrastructure lending is exactly the kind of exposure - long tenor, sector-concentrated, slow to show stress - where trouble typically surfaces years after disbursement, not in the first three years.
NaBFID benefits from India's Insolvency and Banking Code framework, which provides time-bound resolution processes and strips defaulting promoters of control when cases are admitted. According to Moneycontrol analysis, this advantage contrasts with IDBI Bank's experience during the 2008-2013 credit boom, when NPAs climbed from single digits to 27.95% of advances by FY18. The IBC framework gives lenders, at least theoretically, a time-bound resolution process and crucially strips defaulting promoters of control the moment a case is admitted. For an infrastructure lender, this matters more than most, though recoveries under the IBC for large stressed accounts have often involved steep haircuts, and single-asset infrastructure projects can be harder to sell as going concerns than more standard exposures. The bank's AAA rating from all four major rating agencies reflects Delhi's backing more than three years of lending history, though RBI Deputy Governor M. Rajeshwar Rao has called the absence of strong post-disbursal monitoring a "design failure" of India's earlier development finance institutions, urging NaBFID to become self-sustaining rather than perpetually government-dependent.
