India Infrastructure Finance Company Limited (IIFCL) has suggested the Ministry of Finance to introduce measures that would promote borrowing programmes for infra lenders, alongside bringing interest subvention support for the sector. As a part of the pre-budget consultation meeting with the ministry, banks and infra financers have even requested it to bring measures to onboard more state and urban bodies in infra financing.
“We have given our recommendations to her (Finance Minister). These are on promoting borrowing programmes which actually will make it easier for developmental financial institutions to borrow from international markets at very cost-effective rates. The second track, which we have included, is on promoting a lot of distributed financing to state and urban local bodies,” said Palash Srivastava, Managing Director (Addl.Charge), IIFCL to the TNIE.
Infrastructure lenders have asked the finance ministry to facilitate greater access to funding for states to support infrastructure development. They have sought mechanisms to help states tap the financial system for viability gap funding and structured support under hybrid annuity models. Lenders have also
proposed interest subvention at the state level to lower borrowing costs, ease financing constraints, and improve the viability of projects. “We are also looking at some interest subvention support for such financing at the state level,” added Srivastava.
According to media reports, in Budget 2026, the government may announce a Rs 25,000-crore risk guarantee fund for infrastructure projects to spur bank lending.
The proposed fund would offer partial protection to lenders against financial and execution risks, helping crowd in private investment and potentially fast-track stalled projects, particularly in sectors such as roads and railways.
The Center has announced a three-year Public-Private Partnership (PPP) project pipeline for FY26–28 that includes a total of 852 infrastructure projects across central ministries, states and Union Territories, with a combined investment value exceeding Rs 17 lakh crore.