The National Bank for Agriculture and Rural Development (NABARD) and the National Bank for Financing Infrastructure and Development (NaBFID) signed a Memorandum of Understanding (MoU) in Mumbai on 27 August 2026 to jointly finance infrastructure projects with strong rural linkages. The agreement was signed by NABARD Chairman Shaji Krishnan V and NaBFID Managing Director Rajkiran Rai G to expand access to long-term, competitively priced funds. It aims to combine NABARD’s deep rural reach with NaBFID’s expertise in long-term infrastructure financing to build resilient rural infrastructure under the Viksit Bharat vision.
What Does the NABARD NaBFID MoU Cover?
The MoU creates a broad framework for joint financing, knowledge sharing and development of innovative financing solutions for projects that have significant rural impact. Its core purpose is to increase the flow of long-term, competitively priced finance, often called patient capital, to rural infrastructure and allied value chains. The signing took place in the presence of senior leadership, including Monika Kalia, Deputy Managing Director and Chief Financial Officer of NaBFID, and Goverdhan S. Rawat and Ajay K. Sood, Deputy Managing Directors of NABARD.
Under the partnership, the two institutions will explore co-lending and consortium lending structures across the full project lifecycle. This includes project identification, appraisal and due diligence, credit structuring and pricing, and joint monitoring. They will also collaborate on advisory services such as project structuring, financial modelling and debt syndication, helping to make projects commercially viable and bankable. Another pillar is joint capacity building through their respective training establishments, to strengthen skills in infrastructure financing on both the liability and asset sides of their businesses.
The collaboration will cover Public Private Partnership (PPP) projects and agri value chains, as well as infrastructure with strong rural linkages. Key sectors identified are:
| Sector | Examples of Projects |
|---|---|
| Water and Sanitation | Drinking water supply, rural sanitation networks |
| Irrigation | Minor irrigation, micro-irrigation, watershed structures |
| Post-Harvest and Storage | Warehousing, cold-chain facilities, post-harvest storage |
| Markets and Connectivity | Terminal markets, rural roads and bridges |
| Clean Energy and Logistics | Compressed biogas plants, agri-logistics and food processing linkages |
These areas are seen as critical to reducing post-harvest losses, improving market access, raising farmer incomes and building future-ready rural infrastructure.
What is NABARD?
NABARD stands for the National Bank for Agriculture and Rural Development. It is an All India Financial Institution (AIFI) and the apex development bank for agriculture and rural development in India. It was established on 12 July 1982 under the NABARD Act, 1981 (Act 61 of 1981), on the recommendation of the B. Sivaraman Committee constituted in 1979 to review institutional credit for agriculture and rural development. The late Prime Minister Indira Gandhi dedicated NABARD to the nation on 5 November 1982.
NABARD was formed by transferring the agricultural credit functions of the Reserve Bank of India (RBI) and the refinance functions of the Agricultural Refinance and Development Corporation (ARDC). It started with an initial capital of ₹100 crore and is now fully owned by the Government of India. It was earlier jointly owned by Government and RBI, but RBI transferred its entire stake in 2018. It functions under the Department of Financial Services (DFS), Ministry of Finance, and its headquarters is in Mumbai. It operates through 31 Regional Offices, a cell at Srinagar, four Training Establishments, and a network of District Development Managers (DDMs) across districts.
Its mandate covers providing and regulating credit and other facilities for promotion and development of agriculture, micro, small and medium enterprises, cottage and village industries, handicrafts and other rural crafts and allied activities, with a view to promoting integrated rural development. Its three broad roles are financial (refinance and direct finance), developmental (institution building, promotion of Self Help Group-Bank Linkage, farmer producer organisations, watershed programmes) and supervisory (inspection and supervision of Regional Rural Banks (RRBs), State Cooperative Banks and District Central Cooperative Banks). Other functions include credit planning, monitoring, research, consultancy and coordination with Government, RBI and other agencies.
How NABARD Funds Rural Infrastructure: RIDF and NIDA
Two dedicated windows illustrate how NABARD channels funds to rural infrastructure.
Rural Infrastructure Development Fund (RIDF) was created in 1995-96 with an initial corpus of ₹2,000 crore. Resources to RIDF come from the shortfall in priority sector lending by commercial banks, as stipulated by RBI, which banks deposit with NABARD. Each year, the Government decides the RIDF tranche corpus, which is allocated among states based on norms such as geographical area, rural population share, infrastructure index and past utilisation. With allocation of ₹40,475 crore for 2023-24 (Tranche XXIX), the cumulative allocation has reached ₹4,98,411 crore, including ₹18,500 crore under Bharat Nirman. Funds have supported 39 eligible activities under three categories: Agriculture and related sector, Social sector, and Rural connectivity. The State Finance Department is the nodal agency, and NABARD releases funds on reimbursement basis, with 80 to 95% of project cost as loan and an implementation period of 2 to 5 years. This funding has helped unlock stalled irrigation, rural road and bridge projects, creating additional irrigation potential and rural connectivity.
NABARD Infrastructure Development Assistance (NIDA), launched in 2011, is a separate line of credit funded from NABARD’s own cash flows and market borrowings. It was designed because state governments face borrowing limits under Article 293 of the Constitution, and some sectors need funding beyond RIDF. NIDA provides flexible, market-linked, longer-tenure loans, with tenure up to 25 years and moratorium of 2 to 4 years, directly to state governments, state-owned corporations, and other registered entities including cooperatives and PPP entities. In 2023-24, sanctions under NIDA stood at ₹9,934.40 crore and disbursements at ₹7,303.96 crore, covering rural connectivity, irrigation, drinking water, sanitation, renewable energy and agri infrastructure.
What is NaBFID?
NaBFID stands for the National Bank for Financing Infrastructure and Development. It is a specialised Development Financial Institution (DFI) established to address gaps in long-term, non-recourse infrastructure financing in India and to develop the bonds and derivatives markets needed for such financing. The institution was set up under the National Bank for Financing Infrastructure and Development Act, 2021 (Act 17 of 2021). The Act was introduced in Parliament on 22 March 2021, received President’s assent on 28 March 2021, and came into force on 19 April 2021.
NaBFID’s head office is in Mumbai, at The Capital, Bandra Kurla Complex (BKC), and it can open offices or branches within and outside India. Its authorised share capital is ₹1,00,000 crore, divided into 10,000 crore shares of ₹10 each. The Government of India infused an initial capital of ₹20,000 crore along with a grant of ₹5,000 crore. Shares can be held by the Central Government, multilateral institutions, sovereign wealth funds, pension funds, insurers and banks, but the Central Government must hold at least 26% at all times. The institution is regulated and supervised by the Reserve Bank of India as the fifth All India Financial Institution (AIFI), after EXIM Bank, NABARD, National Housing Bank (NHB) and SIDBI, under Sections 45L and 45N of the RBI Act, 1934, effective 8 March 2022.
Its twin objectives are developmental (to coordinate with central and state governments, regulators, financial institutions and investors to build institutions for long-term infrastructure financing, including domestic bonds and derivatives markets) and financial (to lend or invest directly or indirectly and attract private and institutional investment in infrastructure projects located in India or partly outside India to foster sustainable economic development).
NaBFID is led by Managing Director Rajkiran Rai G, former Managing Director and Chief Executive Officer of Union Bank of India, along with Deputy Managing Directors including Monika Kalia (Chief Financial Officer) and B. S. Venkatesha (Chief Risk Officer). Its functions include lending to infrastructure companies, refinancing lenders, subscribing to bonds and debentures, issuing debt securities, extending foreign currency loans, providing partial credit enhancement for infrastructure bonds, supporting securitisation and creation of a secondary market for receivables, and offering advisory services. It is also the discussion anchor for long-term infrastructure financing models in India, often compared with India Infrastructure Finance Company Limited (IIFCL) and the National Investment and Infrastructure Fund (NIIF) in the broader landscape of infrastructure financing institutions.
NABARD vs NaBFID: How the Two Development Banks Differ
Though both are development banks regulated by RBI as AIFIs and headquartered in Mumbai, their origins, focus and toolkits are distinct. Understanding the difference answers common queries such as is NaBFID a subsidiary of NABARD or is NABARD a bank.
| Feature | NABARD | NaBFID |
|---|---|---|
| Full Form | National Bank for Agriculture and Rural Development | National Bank for Financing Infrastructure and Development |
| Established | 12 July 1982 under NABARD Act, 1981 | 2021 under NaBFID Act, 2021, operational from 19 April 2021 |
| Origin | Recommended by B. Sivaraman Committee, took over RBI and ARDC functions | Created to revive DFI model for infrastructure after decades, announced in Budget 2021 |
| Type | Apex development bank for rural and agricultural development, also supervisory body for RRBs and cooperative banks | Specialised DFI for infrastructure, focused on non-recourse long-term finance |
| Ownership | 100% Government of India owned | Central Government holds at least 26%, initial capital infused by Government |
| Headquarters | Mumbai | Mumbai (BKC) |
| Chairman / MD | Chairman Shaji Krishnan V | Managing Director Rajkiran Rai G |
| Core Funding Tool | Refinancing of rural credit, RIDF, NIDA, Long Term Irrigation Fund, Micro Irrigation Fund | Direct lending, refinancing, credit enhancement for bonds, foreign currency loans, zero coupon bonds notified by CBDT |
| Primary Sector Focus | Agriculture, rural infrastructure, rural credit institutions, SHGs, farmer producer organisations | Large-scale infrastructure: transport, energy, water, sanitation, logistics, social and commercial infrastructure |
| Regulator | RBI as AIFI, also under DFS, Ministry of Finance | RBI as AIFI under Sections 45L and 45N of RBI Act, 1934 |
In short, NABARD is not a commercial bank and does not accept public deposits like one. It is a development and refinancing institution for the rural economy. NaBFID is also not a commercial bank or NBFC, but a statutory DFI designed to fill India’s massive infrastructure financing gap by channelling long-term funds that commercial banks, with shorter liability horizons, struggle to provide. The two are separate statutory bodies, not parent and subsidiary.
Why This Partnership Matters for Rural Infrastructure
The significance lies in the connecting the dots between financing gaps and rural outcomes.
First, rural infrastructure has a dual nature. As NABARD’s Chairman noted, it has both a social and a commercial dimension. A village road or a cold chain is a social good that improves access, but it must also be financially sustainable to attract maintenance and private participation. The MoU aims to design market-based, commercially viable and bankable projects rather than purely grant-funded assets. NaBFID’s Managing Director highlighted that food processing, storage and cold-chain connectivity offer real opportunities where such models can work.
Second, rural infrastructure faces a long-term financing gap. Rural roads, bridges, irrigation structures and warehousing need patient capital with 15 to 25 year tenures, while commercial banks often prefer shorter-term loans due to asset liability mismatches. NABARD brings depth of field experience and reach to the last mile through state governments and district machinery. NaBFID brings specialised infrastructure skills, including credit structuring, pricing, debt syndication, partial credit enhancement for infrastructure bonds, and derivatives expertise to deepen the bond market. Together, they can offer larger ticket sizes, blended structures and advisory that a single institution may not provide alone.
Third, the timing aligns with the infrastructure push for Viksit Bharat. Strengthening post-harvest infrastructure directly reduces food losses, stabilises prices, improves farmers’ realisation and supports agri-value chains from farm to terminal market. Investments in water, sanitation, irrigation and compressed biogas improve resilience to climate shocks and support rural energy and health outcomes. Better rural connectivity also improves absorptive capacity for credit, which in turn boosts demand for other rural financial services.
For public finances, the collaboration supports PPP structures and value-chain financing on both the asset and liability sides, helping states use innovative financing without stretching their borrowing limits under Article 293.
The Way Forward
Both institutions described the MoU as a starting point. Implementation will depend on how quickly joint products are designed and rolled out.
The immediate next steps outlined are identifying a pipeline of projects, conducting joint appraisal and due diligence, agreeing on risk sharing and pricing, and setting up joint monitoring mechanisms. On the advisory side, financial modelling, project structuring and syndication will be tested in pilot PPP and agri-logistics projects. Capacity building programmes through the training institutions of both bodies will be scaled to create a cadre in long-term rural infrastructure financing.
Over the medium term, success will be measured by whether the partnership can unlock scalable financing solutions, channel more private institutional investment into villages, and deliver visible outcomes in logistics costs, wastage reduction and rural incomes. If executed well, the NABARD-NaBFID bridge could become a template for how a rural development bank and an infrastructure DFI jointly narrow the rural-urban divide while staying commercially disciplined.
Key Takeaways
- NABARD and NaBFID signed an MoU in Mumbai on 27 August 2026 (signed on 26 August) between Chairman Shaji Krishnan V and Managing Director Rajkiran Rai G to jointly finance rural infrastructure.
- The MoU provides for co-lending and consortium lending, joint project appraisal, credit structuring, pricing and monitoring, plus advisory services in structuring, modelling and debt syndication.
- Focus sectors include water and sanitation, irrigation, post-harvest storage, cold-chain facilities, terminal markets, rural roads and bridges, warehousing and compressed biogas under PPP and agri value chain models.
- NABARD was established on 12 July 1982 under the NABARD Act, 1981 on B. Sivaraman Committee recommendations and is headquartered in Mumbai as an AIFI.
- NaBFID was established in 2021 under the NaBFID Act, 2021 (assent 28 March 2021, effective 19 April 2021), headquartered in Mumbai (BKC), with authorised capital ₹1,00,000 crore, and is the fifth AIFI regulated by RBI.
- NABARD’s rural windows include RIDF (1995-96, initial corpus ₹2,000 crore) funded from priority sector lending shortfall and NIDA (2011) funded from own resources with loans up to 25 years.
