India's government-owned NBCC intends to establish its own non-banking finance company (NBFC) later this year to reduce borrowing expenses for critical infrastructure projects, as per two sources closely engaged with the initiative. The construction and real estate developer anticipates that this step will lead to savings of $108 million in interest expenses over the upcoming two years, the sources revealed.

Infrastructure financial institutions in India are government-owned, yet no other state-run entity has established a subsidiary to aid in project financing. Sources indicated that NBCC's board deliberated on the proposal to establish such a shadow lender in March. The final framework of the NBFC is slated to be determined post-June, according to the sources.
 
NBCC will seek endorsement for the shadow banking entity from the incoming administration following the conclusion of the seven-phase national elections, commencing on Friday. Additionally, the company will require a license from the Reserve Bank of India (RBI), an application for which has not yet been submitted.
 
Currently, NBCC pays 12 percent to 14 percent to other NBFCs in borrowing costs, and that could be lowered by 1-2 percentage points if it sets up the NBFC, the first source said. "The in-house NBFC will help in getting seed money for redevelopment and monetization projects of other public sector entities", said the first source.
 
NBCC has recently secured redevelopment projects from both the Steel Authority of India Ltd and the Indian Railways. The state-owned company had previously proposed the establishment of an NBFC back in 2016, although the endeavor was unsuccessful.