State-owned NBCC is looking to set up its own non-banking finance company (NBFC) later this year to lower its borrowing costs for key infrastructure projects.

The construction and real estate developer estimates the move will help it save $108 million in interest costs over the next two years, Reuters reported quoting sources.

The Indian government owns infrastructure financial institutions but no other state-run company has created a unit to help it finance projects.

The NBCC's board discussed the proposal to set up a shadow lender in March, the sources told Reuters. The final structure of the NBFC will be decided after June.

NBCC will seek approval for the shadow bank from the new administration that will be elected in June, at the end of the seven-phase national polls that started on Friday.

The company will also need a license from the Reserve Bank of India (RBI), which it has not yet applied for, Reuters reported.

Currently, NBCC pays 12% to 14% to other NBFCs in borrowing costs and that could be lowered by 1-2 percentage points if it sets up the NBFC.

"The in-house NBFC will help in getting seed money for redevelopment and monetisation projects of other public sector entities," Reuters quoted a source as saying.

NBCC recently got redevelopment projects from Steel Authority of India Ltd and the Indian railways.