NaBFID to Collaborate with Multilateral Banks for Urban Infrastructure

New Delhi, Feb 6 (PTI) National Bank for Financing Infrastructure and Development (NaBFID) is looking to forge partnerships with multilateral funding agencies for blended finance to develop urban infrastructure and finance sustainable projects of urban local bodies, Financial Services Secretary M Nagaraju said on Thursday.

Blended finance refers to the use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development projects. It brings down the cost of funds and thus is available for sustainable projects at a cheaper cost than traditional funds.

"NaBFID will collaborate with multilateral banks, World Bank and ADB and others, particularly those focused on green funds to provide blended financing structure in India," Nagaraju said while addressing a workshop on 'The Future of Urban India: Strengthening Urban Local Bodies (ULBs) for Sustainable Growth & Development' organised by NaBFID.

Engagement with multilateral institutions will also enable it to learn from global best practices and learning so as to design the risk sharing structures and mechanism, policy frameworks and the strategies for financing the urban infrastructure sector, he said.

State-owned NaBFID can also explore the pool finance structures for municipal finances that could aid raising resources for urban infrastructure.

NaBFID, set up in 2021, is a specialised Development Finance Institution in India aimed at supporting the country's infrastructure sector. It is set up with the essential objectives of addressing the gaps in long-term non-recourse finance for infrastructure development, strengthening the development of bonds and derivatives markets in India, and sustainably boosting the country's economy.

It can also help in designing PPP investable structures through its transaction advisory services, he said.

Building adequate urban infrastructure remains a key deliverable in sustaining and uplifting India's growth potential to its fullest, he said, adding, it will also have a multiplier effect on the economy of a much greater order compared to direct liquid transfers.

It will also enhance the productive potential of human capital through high quality public services.

Speaking at the workshop, Ministry of Housing and Urban Affairs (MoHUA) Secretary Srinivas Katikithala said urban local bodies have a large number of challenges.

However, he said, rapid pace of urbanisation is essential for India's journey to become a developed nation by 2047.

To meet this objective, the government in the budget announced setting up of an Urban Challenge Fund of Rs 1 lakh crore to implement the proposals for 'Cities as Growth Hubs', 'Creative Redevelopment of Cities' and 'Water and Sanitation'.

This fund will finance up to 25 per cent of the cost of bankable projects with a stipulation that at least 50 per cent of the cost is funded from bonds, bank loans, and PPPs.

An allocation of Rs 10,000 crore is proposed for 2025-26, he added.