The Parliament has passed The National Bank for Financing Infrastructure and Development Bill, 2021. Once it gets assent from President, act will establish NBFID as the principal development financial institution (DFI) for infrastructure financing.
Key Provisions of the NBFID Bill, 2021
- Establishes the National Bank for Financing Infrastructure and Development as principal development financial institution (DFIs) for infrastructure financing. 2. NBFID will be a corporate body with authorized share capital of Rs. 1 lakh crores.
- Initially, the central government (CG) will own 100% shares of NBFIC which will subsequently be reduced up to 26%. 3. NBFID will have both financial as well as developmental objectives.
- Financial objectives will be to directly or indirectly (refinancing) lend, invest, or attract investments for infrastructure projects located entirely or partly in India.
- Developmental objectives include facilitating the development of the market for bonds, loans, and derivatives for infrastructure financing. 4. NBFID may raise money in the form of loans (both INR and foreign currencies), bonds and debentures. It can borrow from CG, RBI, commercial banks, mutual funds, multilateral institutions (like World Bank)
- NBFID will be governed by a Board of Directors – whose Chairperson will be appointed by the central government in consultation with RBI.
- No investigation can be initiated against employees of NBFID without the prior sanction of CG and managing director (for employees)
- Courts will also require prior sanction for taking cognizance of offences in matters involving employees of NBFID. 6. Bill provides for any person to set up a DFI by applying for a license from RBI, who will also prescribe regulations for these DFIs.
Limitations of the Bill
- Protection has been provided to management (from investigation and cognizance of offences) for the decisions taken as an act of good faith.
- The failure of Development Financial Institutions (DFI) in the past is also a discouraging factor for setting up a new one.
- Despite the government having a 26% stake in this bank, the Bill does not provide for an oversight mechanism.
