Core Viewpoint - India's main infrastructure lender, NaBFID, is increasing its use of derivatives to mitigate the impact of falling interest rates on its margins [1][3]. Group 1: Derivative Transactions - NaBFID has engaged in derivative transactions with major banks such as JPMorgan Chase, Standard Chartered, Citigroup, and Deutsche Bank, including index swaps and total return swaps [2]. - The lender has ramped up these derivative deals over the past year to counteract the cash flow challenges posed by a 125 basis point reduction in the Reserve Bank of India's main rate [3]. Group 2: Loan and Derivative Values - As of September 30, loans disbursed by NaBFID amounted to ₹91,190 crore ($10.1 billion), reflecting a 21% increase from the end of March [6]. - The notional value of NaBFID's outstanding derivatives reached ₹47,050 crore at the end of September [6]. Group 3: Long-term Hedging Strategies - Some of the derivative deals are now linked to bonds issued by Indian state governments, as rising yields on provincial debt have made these swaps more attractive [4]. - NaBFID is locking in swaps for 10 to 15 years to align better with the duration of its loans [4]. Group 4: Market Context - The shift towards more complex hedging strategies indicates turbulence in India's bond market, where borrowing costs have increased amid uncertainty regarding future rate cuts [5]. - This strategy reflects how NaBFID is preparing for potential volatility as Prime Minister Modi's infrastructure initiatives progress [5].