New Delhi, July 20 -- The Centre is reviving a five-year-old plan to combine two of India's largest infrastructure lenders, two people aware of the discussions said. The proposal to merge the National Bank for Financing Infrastructure and Development (NaBFID) with the India Infrastructure Finance Co. Ltd (IIFCL), if implemented, would create an infrastructure lending giant with a combined loan book of nearly Rs.1.85 lakh crore. The creation of NaBFID in 2021 came with the ambition to merge it with its older cousin IIFCL, but the plan never took off. Momentum from the ongoing merger of power sector financiers REC Ltd and Power Finance Corp. (PFC) has given the plan a new life, the people cited above said on the condition of anonymity. The idea is to create a stronger development finance institution (DFI) that can support India's rapidly expanding infrastructure financing needs. "The proposal, which is at a preliminary stage, seeks to reduce overlaps between the two government-backed institutions, strengthen their lending capacity and create a single infrastructure financing platform capable of mobilizing both domestic and overseas long-term capital for strategic infrastructure projects," one of the two people cited above said. "The objective is to create a stronger infrastructure financing institution with greater scale, improved balance-sheet strength and enhanced ability to raise long-term domestic and international capital." The merger of REC and PFC is expected to create a new lending behemoth with a combined loan book exceeding Rs.11 lakh crore. Encouraged by the operational and financial synergies from that transaction, expected to close by 1 April 2027, policymakers are evaluating whether similar benefits can be realized by bringing together NaBFID and IIFCL, the people cited above said. Queries emailed to the finance ministry, the department of financial services (DFS), NaBFID and IIFCL went unanswered. The Union budget for 2021-22 announced the creation of NaBFID as a dedicated Development Finance Institution (DFI) to provide long-term infrastructure financing, while the Finance Act, 2021 incorporated enabling provisions to facilitate a tax-neutral merger of the existing IIFCL with the newly created institution, should the government decide to pursue such a move. Although the proposal was discussed at the policy level, it did not progress further. Since then, both have evolved separately-NaBFID as India's dedicated DFI focused on catalyzing long-term infrastructure finance, and IIFCL continuing to focus on direct lending, refinance, take-out finance and credit enhancement for infrastructure projects. "The current deliberations effectively revive the earlier proposal, this time against the backdrop of the government's broader strategy of creating larger, specialized state-owned financial institutions with stronger balance sheets, greater financing capacity and improved operational efficiency," said the second person. It also aligns with the government's broader vision to build globally competitive financial institutions to make India a developed nation by 2047, the person added. India's infrastructure financing requirements are significant. The National Infrastructure Pipeline envisages investments of over $1.5 lakh crore across roads, railways, airports, ports, renewable energy, logistics, urban infrastructure and digital connectivity. Financing such projects requires patient, long-term capital, something commercial banks often struggle to provide because of long project gestation periods and asset-liability mismatches....