Alternative financing vehicles drove infrastructure financing: Economic Survey 2025-26

India’s infrastructure financing landscape is undergoing a change and shifting from a historical dependence on bank credit toward a diversified ecosystem of alternative financing vehicles and capital market instruments, said economic survey 2025-26.

The survey noted that credit flows from non-bank financial companies (NBFCs) (net of bank borrowings) to the commercial sector grew at a robust compound annual growth rate (CAGR) of 43.3% during FY20 to FY25, significantly outpacing the 25% CAGR recorded for non-food bank credit over the same period.

“This evolving landscape has been further strengthened by the growing role of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs), which are enabling long-term institutional capital to participate in infrastructure assets,” it said.

Together, these developments are helping to mitigate systemic risks by reducing asset–liability mismatches on bank balance sheets, while enhancing the sustainability of financing for long-gestation infrastructure projects.

A major regulatory milestone in infrastructure credit is the RBI (Project Finance) Directions 2025, effective from 01 October 2025. These guidelines introduce a unified framework for project lending across all financial institutions, ensuring a consistent approach to large-scale financing.

“This provides a more realistic way to handle project delays, which helps in better identifying actual stress and preventing the artificial ‘evergreening’ of loans. Furthermore, by aligning the definition of the ‘Infrastructure Sector’ with the government’s Harmonised Master List (HML) of infrastructure sub-sectors, the RBI has ensured regulatory clarity and policy synchronisation across the entire financial ecosystem,” it noted.  

SEBI’s Small and Medium Real Estate Investment Trusts (SM REIT) framework reduced the minimum asset size relative to existing REITs, from Rs 500 crore to Rs 50 crore. This broadens the universe of monetizable real estate assets and can support urban regeneration/commercial infrastructure by bringing smaller, stabilised assets into a regulated pooled vehicle.

Additionally, Sebi has decided that from 01 January 2026, investments by Mutual Funds and Specialised Investment Funds (SIFs) in REITs will be treated as equity-related instruments, which is expected to ease participation constraints and potentially improve secondary market liquidity.