NaBFID Uses Derivatives to Protect Margins Amid Rate Cuts

The National Bank for Financing Infrastructure and Development (NaBFID) in India is using more derivatives to protect its profits.

Interest rates have been going down, which makes it harder for NaBFID to make money because its loans are repriced every six or 12 months, while its borrowing costs are fixed.

To fix this, NaBFID is doing deals with big banks like JPMorgan and Citigroup.

These deals, called swaps, help NaBFID exchange fixed-rate payments for floating ones, making its cash flow smoother.

NaBFID has also started linking some of these deals to bonds issued by Indian state governments, which makes the swaps more profitable.

The bank is planning for the future by locking in swaps for 10 to 15 years to match the life of its loans.

As of September 30, 2025, NaBFID had disbursed ₹91,190 crore in loans and had ₹47,050 crore in outstanding derivatives.