The National Bank for Financing Infrastructure and Development Bill, 2021
The National Bank for Financing Infrastructure and Development Bill, 2021
(the Bill) was introduced in Lok Sabha on March 22, 2021. The National Bank for
Finance Infrastructure and Development (NBFID) will be the primary development
finance institution (DFI) for infrastructure financing, according to the bill.
DFIs are created to provide long-term financing to parts of the economy where
the risks are too high for commercial banks and other traditional financial
institutions to handle. DFIs, unlike banks, do not accept deposits from
individuals. They raise money from the market, the government, and multilateral
organizations, and are frequently backed by government guarantees.
Purpose and Objectives of the National Bank for Finance Infrastructure and
NBFID’s main developmental goal is to work with both Central and State
Government, regulators, financial institutions, institutional investors, and
other key players in India and abroad to make it easier to construct and improve
the necessary institutions to support the growth of long-term non-recourse
infrastructure finance, including domestic bonds and derivatives markets.
The Institution's financial goal is to lend or invest, directly or indirectly,
and to seek investment from the private sector and institutional investors in
infrastructure projects in India, or partially in India and partially outside
India, to promote India's long-term economic growth.
NBFID would be established as a corporation with INR one lakh crore
authorized share capital. NBFID shares may be held by:
The central government, multilateral institutions, sovereign wealth funds,
pension funds, insurers, financial institutions, banks, and any other
institution prescribed by the central government.
The central government will initially control 100% of the institution's shares,
which may later be cut to as little as 26%.
Functions and Powers of the National Bank for Finance Infrastructure and
The NBFID has both financial and developmental goals. The financial goals will
be to lend, invest, or attract funds for infrastructure projects that are wholly
or partially situated in India.
The infrastructure domain will be defined by the central government, which will
specify the industries that will be covered.
Facilitating the growth of the market for bonds, loans, and derivatives for
infrastructure finance is one of the development goals. Functions of NBFID
Extending loans and advances for infrastructure projects, taking over or
refinancing such existing loans, attracting investment from private sector
investors and institutional investors for infrastructure projects, organizing
and facilitating foreign participation in infrastructure projects, facilitating
negotiations with various government authorities for dispute resolution in the
field of infrastructure financing, and providing consultancy services in
Prohibited Business for the National Bank for Finance Infrastructure and
The NBFID will not provide any loans or advances using its bonds or debentures
as collateral. They may not issue loans or advances to any person or group of
people in whom any of the Institution's directors is a proprietor, partner,
director, employee, or guarantor, or in which one or more of the Institution's
directors has a significant stake.
In regards to a borrower, substantial interest refers to the beneficial interest
owned by one or more of the Institution's directors or by any relative of such
director as defined in Clause (77) of Section 2 of the Companies Act, 2013,
whether individually or collectively, in the shares of the borrower, and the
aggregate amount paid-up on which either exceeds fifty lakhs rupees or 2% of the
borrower's paid-up share capital, whichever is lower, or such other threshold as
may be specified.
Source of funds:
NBFID may raise funds by loans or other means in both Indian rupees and
international currencies, or by issuing and selling a variety of financial
products such as bonds and debentures.
NBFID may borrow money from:
The central government, Reserve Bank of India (RBI), scheduled commercial banks,
mutual funds, and multilateral institutions such as the World Bank and Asian
Management of the National Bank for Finance Infrastructure and Development:
The Board has general supervision, direction, and control of the NBFID’s
operations and operations, and can exercise all powers and perform all actions
and things that the Institution may exercise or perform.
It is governed by a Board of Directors and the members of the Board include:
a Chairperson, to be appointed by the Central Government in consultation with
the Reserve Bank;
a Managing Director, to be appointed by the Board, on the recommendations of the
Bureau subject to procedure and clearances from agencies determined by the
not more than three Deputy Managing Directors, each of whom has to be selected
by the Board on the Bureau's proposal and subject to the Central Government's
procedure and permissions from such authorities;
two directors, to be nominated by the Central Government, who will be the
officials of the Central Government;
several directors not exceeding three, chosen by shareholders in the manner
stipulated, such that a shareholder owning 10% or more of the total issued
equity share capital, other than the Central Government, can nominate one
The Board will nominate three independent directors, or one-third of the total
number of directors on the Board, whichever is higher, on the proposal of the
Nomination and Remuneration Committee.
Candidates for the positions of Managing Director and Deputy Managing Directors
shall be recommended by a central government authority. On the proposal of an
internal committee, the Board will nominate independent directors.
Support from the Central Government:
The Central Government provides financial assistance to NBFID in the form of
grants or contributions, if needed, in the form of cash or marketable government
securities. By the conclusion of the first fiscal year, the Central government
would have provided NBFID with funds of Rs 5,000 crore. The government would
also give a guarantee for borrowing from multilateral organizations, sovereign
wealth funds, and other foreign entities at a reduced cost of up to 0.1 percent.
The government may refund some or all of the costs associated with protecting
against currency volatility. Upon request by NBFID, the government may guarantee
the bonds, debentures, and loans issued by NBFID.
Hedging costs incurred by the Institution in connection with any foreign
currency borrowing to issue loans and advances or repay them, to protect the
Institution against rate fluctuations, may be repaid in part or in full by the
The Government must establish a concessionary fee rate of not more than 0.1
percent at which the Government may offer a guarantee to the Institution for
borrowings from multilateral institutions, sovereign wealth funds, and other
foreign institutions as may be authorized.
Prior Sanction for Investigation and Prosecution:
No investigation agency, including the Police, Central Bureau of Investigation
(CBI), Serious Fraud Investigation Office, Directorate of Enforcement, and such
other agencies, are in the position to conduct any inquiry or investigation into
any offence alleged to have been committed under any law, concerning any
recommendation made or decision taken by the Chairperson or other directors,
employees or officers of the Institution in the discharge of their official
functions or duties, without the previous approval of the central government in
the case of the chairman or other directors, and the managing director in the
case of other workers. In cases involving NBFID staff, courts will also seek
prior sanction before taking cognizance of the offence.
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