NaBFID Moves Fast on Dollar Loan as RBI Opens Foreign Currency Funding Window

India's National Bank for Financing Infrastructure and Development (NaBFID) is exploring a five-year dollar-denominated loan as it seeks to benefit from recent measures introduced by the Reserve Bank of India (RBI) to encourage foreign currency inflows. The state-owned infrastructure financing institution is currently in discussions with lenders and aims to secure overseas funding at a competitive cost to support its lending and infrastructure development activities.

According to Managing Director Rajkiran Rai G., NaBFID is targeting an all-inclusive borrowing cost of 6.5% to 7%, taking into account hedging expenses. The final size of the proposed loan will depend on the pricing offered by lenders. The institution plans to raise between $8 billion and $9 billion from both domestic and international markets during the financial year ending March 2027, reflecting its ambitious funding requirements for infrastructure projects across the country.

The move comes shortly after the RBI announced a concessional foreign exchange swap facility for state-owned companies. Under the new arrangement, eligible firms can access foreign exchange hedging at a fixed rate of 1.5% per year. Market analysts believe the facility could significantly reduce hedging costs, making overseas borrowing more attractive for public sector entities and infrastructure lenders seeking long-term capital.

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Higher hedging costs and volatility in the Indian rupee had previously discouraged many borrowers from tapping offshore markets. The RBI’s latest initiative is expected to improve access to foreign capital by lowering borrowing costs and reducing currency-related risks. For institutions such as NaBFID, the measure could provide a timely opportunity to diversify funding sources and accelerate investments in India's growing infrastructure sector, which remains a key driver of economic growth and development.

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