Government mulls Rs 20,000-crore risk guarantee fund to boost infra push

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The government is working on plans to set up a Rs 20,000-crore risk guarantee fund for the infrastructure sector to encourage investment, the Economic Times reported.

The report said that the fund, to be managed by the National Credit Guarantee Trustee Company, will cover losses arising from policy uncertainty and other non-commercial risks, thereby encouraging lenders to extend larger loans to big projects.

According to the report, the government will provide the initial corpus, and the fund will focus only on new infrastructure projects. It will underwrite development risks such as delays, cost overruns, and disruptions linked to land acquisition or environmental clearances.

The National Bank for Financing Infrastructure and Development (NaBFID) is expected to submit recommendations within two weeks. A senior bank executive told ET that NaBFID will examine issues like how risk premiums should be shared between authorities and developers, the conditions for triggering guarantees, and safeguards to ensure accountability.

India requires an estimated $4.5 trillion investment by 2040 to sustain its growth through infrastructure development. For this fiscal, the Centre has set aside Rs 11.21 lakh crore, or 3.1% of GDP, as capital expenditure.

A finance ministry statement said financial services secretary M Nagaraju held a review meeting this week to discuss sectoral financing challenges