The bill seeks to establish NaBFID with an authorised share capital of ₹1 lakh crore to support the development of long-term non-recourse infrastructure financing in India including development of the bonds and derivatives markets necessary for in...
By ET Bureau | Updated:
Agencies
The Union Cabinet had last week approved a budget proposal of setting up a DFI, which will have tax benefits to enable fund raising from investors.
The government on Monday introduced the National Bank for Financing Infrastructure & Development Bill, 2021, in the Lok Sabha, paving the way for creation of a state-owned developmental financial institution as also private ones.
The bill seeks to establish NaBFID with an authorised share capital of ₹1 lakh crore to support the development of long-term non-recourse infrastructure financing in India including development of the bonds and derivatives markets necessary for infrastructure financing and to carry on the business of financing infrastructure.
“Its aim is to address market failures that stem from the long term, low margin and risky nature of infrastructure financing,” the government noted in statements of objects and reasons for the bill, observing that exposure to long-term infrastructure financing has been a fundamental source of asset-liability mismatch on the balance-sheets of the banks, which raises systemic concerns. “In view of this, government's intervention is necessary to facilitate and to enable flow of low cost, long-term, patient capital (primarily debt) from India or abroad into greenfield infrastructure projects to foster sustainable economic development,” it noted.
The Reserve Bank will in consultation with the government issues licences and specify conditions for setting up of private sector DFIs.
The government's stake will not go below 26% in the proposed state-owned entity, which would be headquartered at Mumbai. The bill seeks to provide indemnity to its employees for their decisions and government nod would be required for any probe by an investigating agency such as the CBI or Serious Fraud Office.
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The government will provide the Institution with grants and contributions, guarantees at concessional rates for foreign borrowings and any other concessions and dilution or sale of stake may be considered once the institution has achieved stability and scale.
The bill has provisions to enable the central government, multilateral institutions, sovereign wealth funds, and other such institutions to hold equity in the proposed institution.
Last week, the Cabinet had given its nod to the bill that was announced in the budget last month.
