Union Budget may unveil Rs 25,000 crore fund to revive stalled infra projects: Report

Government estimates indicate that India will require about USD 2.2 trillion in infrastructure spending by 2030 to support its ambition of becoming a USD 7 trillion economy.

• Govt may set up Rs 25,000 crore risk guarantee fund for infrastructure projects
• Fund to cut financing risks, boost credit for stalled projects
• FY27 Budget may include small business schemes proposal.

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The Union government is considering the creation of a Rs 25,000 crore risk guarantee fund for infrastructure projects as part of efforts to unclog financing bottlenecks and revive stalled developments, Mint has learnt from people familiar with the matter.

The proposed safety net, modelled on existing credit guarantee schemes for small businesses, could be unveiled in the Union Budget for FY27, the media report said.

The proposal was submitted to the finance ministry by a committee set up under the National Bank for Financing Infrastructure and Development (NaBFID). As reported by Mint, the National Credit Guarantee Trustee Co. (NCGTC) is expected to provide guarantees against development risks, enabling banks and financial institutions to extend loans on more flexible terms.

The move comes against the backdrop of mounting project delays, cost overruns and elevated borrowing costs that have long constrained private investment in infrastructure. Government estimates indicate that India will require about USD 2.2 trillion in infrastructure spending by 2030 to support its ambition of becoming a USD 7 trillion economy.

A government official told Mint that the proposed fund would partially guarantee loans extended to infrastructure projects for a nominal fee. This, the official said, would reduce financing risks for lenders, encourage greater credit flow and allow banks to take larger exposures. While the guarantee fee would add marginally to borrowing costs, the impact on lending rates is expected to be limited.

Discussions around the fund have been ongoing within the government for some time. The initial corpus is expected to be provided through the Union Budget, with the finance ministry also exploring participation from both public and private sector financial institutions, Mint reported. The mechanism is expected to mirror the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE), launched in 2000 to facilitate collateral-free lending to micro and small businesses.

A NaBFID official told Mint that the recommendations were submitted a few months ago and are now likely to be taken up for consideration in the upcoming Budget. Queries sent to the finance ministry, the department of financial services and NaBFID on December 25 did not receive responses by press time.

If implemented, the initiative is expected to lower financing risks for banks and non-banking lenders, spur higher credit flow at competitive rates and enable larger exposures to infrastructure projects. Experts cautioned, however, that the effectiveness of the fund would depend on robust risk pricing and disciplined underwriting standards.

India's capital expenditure allocation for FY26 stands at Rs 11.21 trillion, or about 3.1 percent of GDP, compared with Rs 11.11 trillion, or around 3.4 percent of GDP in the previous Budget. Despite higher public spending, external risks and project-level challenges continue to weigh on infrastructure financing, Mint noted.

Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat, told Mint that reluctance to fund large infrastructure projects stems more from policy uncertainty and non-commercial risks than from growth prospects. A Rs 25,000 crore risk guarantee fund, he said, could act as an effective credit enhancement tool, particularly if structured as a public-private partnership to balance efficiency and governance.

Persistent delays and cost overruns remain a drag on funding flows, especially in the roads and highways sector. Data shared by the ministry of road transport and highways in the Rajya Sabha on December 17 show that 574 National Highway projects awarded over the past five years, with a combined cost of about Rs 3.60 trillion, have exceeded their original completion timelines.

More than 300 projects are delayed by up to a year, while 253 have faced delays ranging from one to three years. Another 21 projects are running over three years behind schedule, excluding those under consideration for termination or foreclosure. In addition, 133 highway projects, with a total cost of around Rs 1 trillion, have been awarded but are yet to begin construction due to issues such as lack of encumbrance-free land, pending forest and wildlife clearances, delays in financial closure and non-submission of bank guarantees by contractors, Mint reported.