Rationale

 The rating reaffirmation factors in National Bank for Financing Infrastructure and Development’s (NABFID) strategic role, as one of the principal entities for extending infrastructure financing in the country, as well as its sovereign ownership with the Government of India (GoI) holding a 100% stake as on March 31, 2024. NABFID was set up under an Act of Parliament in 2021, and the GoI had adequately capitalised it with an upfront capital infusion of Rs. 20,000 crore in addition to providing a grant of Rs. 5,000 crore to support its competitiveness. Further, concessional rates of GoI guarantees for select borrowings as well as an income tax holiday for 10 years demonstrate the GoI’s intent to support the bank in meeting its stated objectives. NABFID is expected to continue receiving support in the form of capital when needed, although this is not expected in the initial few years of operations. Following its establishment in FY2022, NABFID's scale of operations is picking up pace gradually with cumulative sanctions and disbursements of Rs. 1.02 lakh crore and Rs. 0.35 lakh crore, respectively, till March 2024. With a loan book of Rs. 0.35 lakh crore as of March 2024, this is likely to pick up further due to the existing and incremental sanctions. Given the sizeable upfront capital infusion, the bank remains well capitalised and geared for expanding its scale in the near to medium term, which could lead to a gradual increase in the leverage1 , which stood at 0.9 times as on March 31, 2024. Given the early stage of operations, the profitability indicators do not truly reflect the business metrics. Going forward, NABFID’s ability to grow its loan book profitably while maintaining prudent capitalisation levels and underwriting standards, and hence asset quality indicators, would be the key monitorable. ICRA also expects the bank to ensure the mobilisation of resources, in line with the maturity profile of its assets and at competitive rates (as shown in past issuances), thereby supporting its asset-liability maturity (ALM) profile. ICRA expects that NABFID will benefit from its role of a dedicated and specialised financial institution for the development of the Indian infrastructure sector and will keep benefitting from its sovereign ownership, driving the Stable outlook on the longterm rating.