Government introduces National Bank for Financing Infrastructure and Development Bill in Lok Sabha

The Union Cabinet had last week approved a budget proposal of setting up a Development Finance Institution

Finance Minister Nirmala Sitharaman on Monday introduced a Bill in the Lok Sabha to set up a National Bank for Financing Infrastructure and Development (NaBFID) to provide long-term funding for infrastructure projects.

Introducing the National Bank for Financing Infrastructure and Development (NaBFID) Bill in the Lok Sabha, Sitharaman said that the Indian corporate bond market was not sufficiently deep and was inadequately mature to meet the country's infrastructure financing requirements.

“In view of this, Government's intervention is necessary to facilitate and to enable the flow of low cost, long-term, patient capital (primarily debt) from India or abroad into greenfield infrastructure projects to foster sustainable economic development,” the minister said.

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She said that the Institution shall be wholly-owned by the Central Government, to begin with in order to foster confidence in its stability and sustainability and to raise resources at competitive rates.

“The Government will provide the Institution with grants and contributions, guarantees at concessional rates for foreign borrowings and any other concessions,” the minister said.

She said dilution or sale of stake may be considered once the Institution has achieved stability and scale in its business operations but the Government would at all times hold 26% of the paid-up voting equity share capital.

The Union Cabinet had given its approval to the bill at a meeting last week.

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The DFI would seek to raise funds from global pension and insurance sectors for investment in new projects, carrying certain tax benefits.

The DFI will start with a clean slate and the board will make a decision on the merger or acquisition of other entities such as the India Infrastructure Finance Company Limited.

The institution will have a professional board, led by a person of eminence with enough heft and stature to meet the requirements of the new century.

Sitharaman referred to institutions such as the IDBI that were established to fund infrastructure projects but gradually changed their nature of business.