India’s infrastructure financing has become concentrated among a few large players, especially after the 2018 IL&FS crisis, limiting access to funding for SMEs. To address this, empowering mid-sized financiers like NBFCs is crucial for a balanced financial ecosystem.
NBFCs provide credit to sectors underserved by traditional banks, including SMEs and the informal economy. However, they face liquidity challenges due to restricted funding sources. The Finance Industry Development Council (FIDC) has urged the government to establish a refinance or liquidity facility to support lending in priority sectors like agriculture, MSMEs, and renewable energy. They propose involving development-focused institutions such as SIDBI to enable better access to funds.
Additionally, the Pooled Finance Development Fund Scheme (PFDF) offers credit enhancement to Urban Local Bodies (ULBs) based on their creditworthiness, helping them secure market borrowings for urban infrastructure projects.
Implementing these measures can create a more inclusive and competitive financing environment, ensuring mid-sized financiers receive the necessary support to drive India’s infrastructure development.