NaBFID, multilateral agencies to back high-rated infra debt

The proposed backstop arrangement will allow NaBFID to provide partial credit guarantees

- Subhash Narayan & Rhik Kundu

The National Bank for Financing Infrastructure and Development (NaBFID) is collaborating with the World Bank and the Asian Development Bank (ADB) on a $1 billion risk-sharing facility to introduce credit enhancement products, two people familiar with the matter told Mint.

The proposed backstop arrangement will allow NaBFID to provide partial credit guarantees, helping infrastructure firms, primarily those with ‘BBB’ to ‘A’ credit ratings, enhance their credit profiles, lower borrowing costs, and access the bond market on more favourable terms, they said, requesting anonymity.

Typically, an ‘A’ rating signifies high credit quality and low default risk, while ‘BBB’ indicates medium credit quality with moderate default risk.

The market opportunity for credit-enhanced bonds is estimated at around ₹5 trillion, with NaBFID eyeing potential exposure of up to ₹75,000 crore over the next two years, the two people added.