Infrastructure Bonds

Infrastructure bonds, also referred to as Infra Bonds, are long-term, fixed debt instruments to finance infrastructure projects like railways, airports, roads and power plants. These bonds are issued by government bodies (e.g., NHAI or state infrastructure development corporations), banks and authorized financial institutions. In the FY25-26 Union budget, Finance Minister Nirmala Sitharaman introduced the PCE facility to boost the credit rating of corporate bonds in India for infrastructure. This encourages broader participation in domestic debt markets and de-risk infrastructure bond issuances.

Government Infrastructure Bonds

Government Infrastructure Bonds are issued by the Central or State Governments or their agencies to finance major infrastructure projects such as roads, railways, and power plants. National Highways Authority of India (NHAI), Power Finance Corporation (PFC), Indian Railway Finance Corporation (IRFC) and Rural Electrification Corporation Limited (REC) are the major issuers of government infra bonds and are AAA bonds. These bonds carry low risk and offer the highest safety, backed by central or state governments.

National Highways Infra Trust (NHAI InvIT) Bonds allow its investors to fund infrastructure in exchange for fixed returns paid semi-annually or monthly, having long term tenures. NHAI InvIT are rated AAA, indicating the highest safety for financial obligations. These NHAI bonds are listed on stock exchanges, allowing investors to buy and sell. Investors should consider the implications of taxation on bonds, as it can impact one’s post-tax yield.

Active NHAI Infrastructure Bonds

Below is the list of active NHAI InvIT bonds listed on NSE and BSE:-

Bank-Issued Infrastructure Bonds

RBI offers Cash Reserve Ratio (CRR)/Statutory Liquidity Ratio (SLR) exemptions (subject to conditions) to banks issuing infrastructure bonds. This makes bank issuers a more cost-effective option to raise money as compared to traditional fixed deposits, where a portion of the money is locked in non-earning assets. These also help banks to diversify their funding beyond deposits and increase their participation in the bond market, while reducing asset-liability mismatches.

Recent Infrastructure Bond Issuances

On 23 March 2025, Indian Bank issued 10 year long term infra bonds at a coupon rate of 7.15%. The bank has raised Rs 5,000 crore, including Rs 3,000 crore in the greenshoe option. The bonds have a credit rating of 'AAA' with a 'Stable' outlook by CRISIL and CARE.

In December 2025, Bank of India issued Long Term Infrastructure Bonds at a coupon rate of 7.23% p.a. through the NSE Electronic Bidding Provider Platform. The bank raised Rs 10,000 crore, having a base issue size of Rs 5,000 crore with a Green Shoe option of Rs 5,000 crore. The fund would be used to finance infrastructure subsectors and affordable housing projects.

Green Infrastructure Bonds

Green Infrastructure Bonds (GIBs) are issued to finance projects that promote green infrastructure, such as water conservation projects, projects related to natural resources and ecosystems, urban green spaces, reforestation, etc. YES Bank was the first Indian Bank to issue Green Infrastructure Bonds worth Rs 1,000 crore in 2015. Municipal corporations also issue green municipal bonds to finance environmentally sustainable projects like renewable energy and offer a sustainable model for funding urban infrastructure. For instance, in February 2023, the Indore Municipal Corporation issued its green bonds for the development of a solar power plant of 60 megawatts.

Bonds issued by infrastructure companies often factor in the inherent risk related to longer maturity periods and cash flow concerns, especially in the initial stages of a project. With the continued focus of the government towards infrastructural spending, the PCE framework was introduced to enhance the credit ratings of bonds. RBI allows NBFCs, commercial banks and DFIs to provide PCE. National Bank for Financing Infrastructure and Development (NaBFID) is a key player, providing PCE facility to improve the credit profile of infra bonds.

Introduced in 2021, NaBFID is a financial institution that supports the country's infrastructure sector. It provides a Partial Credit Enhancement (PCE) facility to improve the credit rating of infrastructure bonds, which reduces borrowing costs for projects and encourages investment. It guarantees up to 20% (maximum 50%, effective April 1, 2026) of bond repayments and thereby improves access to long term capital for infrastructure projects.

Investors can purchase infrastructure bonds either during a public issue (i.e., primary market) or through NSE or BSE (i.e, secondary market), where bonds are traded after issuance, using a demat account. Investors can also invest through SEBI-registered Online Bond Platform Providers (OBPPs) for a streamlined and digital process.

Individuals can also invest in bonds via private placements, which are issued mainly to institutional investors, high-net-worth individuals and are usually not easily accessible to small retail investors.