India’s National Bank for Financing Infrastructure and Development (NaBFID) today said it is introducing a partial credit enhancement solution for infrastructure companies.

This will help financial institutions that are unable to invest in infrastructure debt securities because of ratings constraints as infrastructure companies – particularly developers – do not have the ratings of AA or higher required by insurers, pension and provident funds, said Piyush Gupta, consulting and financial services director at Crisil, S&P Global’s Indian arm.

He was speaking with this news service on the sidelines of NaBFID’s annual infrastructure conclave in Mumbai.

Earlier in the day, NaBFID released its report (pictured) on the credit enhancement initiative, for which Crisil was a knowledge partner.

The framework approved recently by India’s central bank expands the list of entities that can provide partial credit enhancements as well as those that can seek enhancements. It also allows providers to cover 50% of an overall debt issue from 20% earlier.

While banks and non-bank finance companies have been supporting infrastructure development, it is important to diversify the sources to include the corporate debt market, said Gupta.

Banks remain critical to financing development, particularly in the early stages, as they offer working capital bridge loans and initial debt tranches that enable financial closure, NaBFID Managing Director Rajkiran Rai G said earlier in the day.

The share of infrastructure loans fell to below 8% in the last financial year from 2024 through March 2025, Rai said.

While global investors have noticed that defaults in the sector are at historic lows, and have increased both debt and equity commitments, Rai said that domestic institutions are still cautious, preferring the conventional safety of government securities over better returns.

In its four years since inception, NaBFID has sanctioned INR 4tn (USD 45.4bn), including in-principle sanctions, he said.