Infrastructure Finance and DFI Operations
What the exam tests
This domain checks whether you understand NaBFID as a statutory development financial institution, not a commercial bank. Questions often turn on mandate, permitted instruments, funding structure, and how a DFI's long-tenor liability profile differs from a bank's.
Core rules and concepts
- NaBFID was set up under the National Bank for Financing Infrastructure and Development Act, 2021, with authorised capital of ₹1 lakh crore and initial paid-up capital of ₹20,000 crore subscribed by the Government of India.
- RBI regulates NaBFID as an All India Financial Institution (AIFI) under the RBI Act framework; it does not operate as a deposit-taking commercial bank.
- Mandate: direct lending, refinancing, credit enhancement, guarantee, takeout finance, underwriting, and attracting domestic and foreign investment into infrastructure.
- Eligible infrastructure is generally read with the government's harmonised master list of infrastructure sub-sectors; sector eligibility and concession structure matter before financial analysis begins.
- DFI funding is wholesale and long-dated: bonds, debentures, borrowings, multilateral lines. Asset-liability matching is central because infra loans can run 15-20 years.
Worked example
A 20-year annuity road project needs ₹1,000 crore. A commercial bank may lend five years and refinance; a DFI can issue a 15-year bond at 7.8% and lend at 9.3%. Spread = 1.5% × ₹1,000 crore = ₹15 crore annual gross margin before credit costs. If expected credit loss is 0.6% of exposure (₹6 crore) and operating cost is ₹3 crore, risk-adjusted margin is ₹6 crore. The reasoning: DFI viability depends on term premium, not deposit franchise.
Traps
Do not call NaBFID a scheduled commercial bank or assume CRR/SLR and deposit insurance apply. Do not ignore the difference between direct lending and credit enhancement. Do not treat a project as infra merely because it is large; check the harmonised list and concession terms.