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The Central government is considering reviving its proposal to merge the National Bank for Financing Infrastructure and Development (NaBFID) with India Infrastructure Finance Company Ltd (IIFCL) to strengthen long-term infrastructure financing. The move follows progress on the proposed REC-PFC merger and aims to create a larger development finance institution with a combined loan book of nearly INR 1.85 trillion. The proposed consolidation is expected to enhance lending capacity and support financing requirements for India's expanding infrastructure pipeline.
The Central government is evaluating the possibility of merging the National Bank for Financing Infrastructure and Development (NaBFID) with India Infrastructure Finance Company Ltd (IIFCL), reviving a proposal that has remained under consideration since the development finance institution was established. The exercise forms part of a broader review of government-backed financial institutions as policymakers explore ways to strengthen long-term infrastructure financing in the country.
The proposal has resurfaced at a time when the government is examining consolidation across public sector financial entities with similar mandates. Although discussions are still at a preliminary stage and no final decision has been taken, officials are assessing whether combining the two institutions could create a stronger financing platform capable of supporting India's growing infrastructure investment pipeline.
NaBFID was established under the National Bank for Financing Infrastructure and Development Act, 2021, with the objective of addressing the shortage of long-term capital available for infrastructure projects. The institution was created to finance sectors including transport, urban infrastructure, renewable energy, logistics, digital infrastructure and social infrastructure by mobilising both domestic and international sources of funding. IIFCL, incorporated in 2006, has also played a significant role in infrastructure financing through direct lending, refinancing and credit enhancement mechanisms for eligible projects.
A merger would bring together two institutions with complementary functions under a single organisational framework. Based on their current financial position, the combined entity is expected to have a loan portfolio of nearly INR 1.85 trillion, making it one of the country's largest specialised infrastructure financiers. A larger balance sheet could improve its ability to participate in high-value projects while expanding access to long-term capital from domestic and overseas markets.
The renewed proposal follows the government's continued focus on rationalising public financial institutions to improve operational efficiency and optimise the deployment of capital. Officials are examining whether a unified institution could reduce duplication in lending activities, strengthen risk management and provide a more coordinated approach to financing infrastructure assets across multiple sectors.
India's infrastructure development programme has expanded significantly in recent years, supported by increased public capital expenditure on roads, railways, airports, ports, urban development and clean energy projects. These sectors require substantial long-tenure financing, creating demand for institutions with the financial capacity and sectoral expertise to support projects throughout their development lifecycle.
Before any merger is implemented, the government will need to examine regulatory approvals, governance arrangements, capital adequacy, organisational integration and the treatment of existing loan portfolios. These aspects are expected to form part of a detailed evaluation before a final decision is taken.
While the proposal remains under consideration, it reflects the government's continued emphasis on building stronger financial institutions capable of supporting India's long-term infrastructure ambitions. The outcome of the review is expected to determine whether the two specialised lenders will continue operating independently or be brought together under a single institutional structure.
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