0.1% Concessional Guarantee Fee for NaBFID: Finance Ministry Notification Explained
The Finance Ministry has notified a 0.1% concessional guarantee fee on government guarantees provided to the National Bank for Financing Infrastructure and Development (NaBFID).
This blog breaks down the implications, eligibility, legal backing, and practical significance of this concessional fee for NaBFID-backed instruments.
What is NaBFID?
The National Bank for Financing Infrastructure and Development (NaBFID) is a statutory DFI set up under the NaBFID Act, 2021, to catalyse long-term infrastructure financing. It enjoys sovereign support, enabling it to raise funds backed by government guarantees.
Key Highlights of the 0.1% Guarantee Fee Notification
- Effective Date: 23rd July 2025
- Notification Issued By: Department of Financial Services, Ministry of Finance
- Fee Rate: 0.1% per annum of the guaranteed amount
- Applicability: Central Government guarantees extended to NaBFID only
- Period Covered: Up to 31st March 2030 (unless revised earlier)
Legal Basis
The concessional rate has been notified under the powers conferred by Rule 3 of the Guarantee Fee Rules, 2003, read with Rule 7 of the General Financial Rules, 2017.
It overrides the general rate of 1.2% per annum, applicable to other government guarantees, as per the Ministry’s Office Memorandum dated 31st March 2023.
Why Is This Significant?
This move reduces the cost of raising funds for NaBFID. The concessional 0.1% guarantee fee:
- Helps NaBFID offer infrastructure loans at lower interest rates
- Encourages more private participation in infrastructure projects
- Reduces fiscal burden on infrastructure developers indirectly
- Reinforces the government’s backing to NaBFID’s financial instruments
Comparison: Regular vs NaBFID Guarantee Fees
| Particulars | Regular Entities | NaBFID (till 2030) |
|---|---|---|
| Standard Guarantee Fee | 1.2% per annum | 0.1% per annum |
| Governing Rules | GFR + OM 2023 | GFR + Notification 2025 |
| Government Backing | Conditional | Fully Sovereign |
| Cost to Borrower (Indirectly) | Higher | Lower |
Expert View: Why This Matters for Infra Funding
“A concessional guarantee fee is not just a rate reduction—it’s a signal. It tells investors that the government is committed to keeping NaBFID’s capital costs low and its creditworthiness high.”
— Efiletax Infra Policy Team
Who Benefits from This Concessional Fee?
- NaBFID, by paying less for government guarantees
- Infrastructure companies, via lower-cost loans
- Investors, due to reduced risk perception
- Government, through improved public-private project execution
Government Sources & References
- Notification No. F.1/2/2021-Infra-FS dated 23.07.2025 (PIB)
- NaBFID Act, 2021 – PRS India
- Guarantee Fee Rules, 2003 – DEA
FAQ: 0.1% Concessional Guarantee Fee
Q1. Is this concessional rate available to all DFIs?
No. As of now, it is exclusively applicable to NaBFID.
Q2. Will this reduce infrastructure loan rates?
Yes, it can reduce NaBFID’s cost of funds, enabling cheaper infrastructure lending.
Q3. Is this fee charged to borrowers?
No. It’s paid by NaBFID for the government guarantee on its borrowings.
Summary
Finance Ministry has notified a 0.1% concessional guarantee fee for NaBFID, valid till 31st March 2030. This move reduces cost of infrastructure finance and strengthens sovereign support for NaBFID.