Budget 2026: Centre Weighs ₹25,000 Crore Risk Guarantee Fund to Boost Infra Financing

Ahead of the Union Budget for FY27, the Centre is mulling a ₹25,000 crore safety buffer for infrastructure projects, Mint reported citing sources. The proposed risk guarantee fund is expected to ease the financing crunch in the infrastructure sector and help revive stalled projects.

The move comes against the backdrop of rising project delays, cost overruns, and higher borrowing costs, which have limited investment flows into the infrastructure sector. As per the report, government estimates suggest India needs nearly $2.2 trillion in infrastructure investment by 2030 to sustain its $7 trillion growth ambition.

“The risk guarantee fund would cover a portion of loans extended by banks and financial institutions to infrastructure projects for a nominal fee. This would reduce financing risk, enable higher credit flow, and allow lenders to take larger exposures. While the guarantee cost would be added to borrowing costs, the impact on lending rates is expected to be minimal,” the report said citing sources.

The fund is expected to be announced in the Union Budget, which Union Finance and Corporate Affairs Minister Nirmala Sitharaman will present on February 1. As per the report, the finance ministry is also in talks with public and private sector financial institutions, and the fund will function on the lines of the Credit Guarantee Fund Scheme for Micro and Small Enterprises to provide collateral-free credit.

The proposal was submitted to the finance ministry by a committee formed under the National Bank for Financing Infrastructure and Development (NaBFID). According to the report, the National Credit Guarantee Trustee Company is likely to underwrite development risks for infrastructure projects, enabling easier lending by banks and financial institutions.

Industry experts said the fund could serve as a critical credit enhancement tool, though they flagged external risks as a continuing challenge for funding large infrastructure projects.

The ministry has said that 133 National Highway projects worth ₹1 trillion have been awarded, but construction has not yet begun, the report said. These projects are reportedly stalled due to non-fulfilment of prerequisites such as land availability, pending forest and wildlife clearances, delays in achieving financial closure, and submission of bank guarantees.