The Union government on Monday tabled the National Bank for Financing Infrastructure and Development Bill which will aim to provide long-term finance for infrastructure projects in the country. Finance minister Nirmala Sitharaman had announced the setting up of the new entity while presenting the Budget in February.
The proposed legislation will give effect to the Budget announcement made by the Finance Minister on February 1. The government has proposed Rs 20,000 crore to capitalize the institution.
According to the Centre, this Bill will establish the National Bank for Financing Infrastructure and Development to support the development of long-term non-recourse infrastructure financing in India, including the development of the bonds and derivatives markets necessary for infrastructure financing and to carry on the business of financing infrastructure.
The Union Cabinet had last week approved the Budget proposal of setting up a development finance institution (DFI), which will have tax benefits to enable fundraising from investors. The National Bank for Financing Infrastructure and Development will be set up with a corpus of Rs 20,000 crore and the government will give an initial grant of Rs 5,000 crore.
The government expects the DFI to leverage this fund to raise up to Rs 3-lakh crore in the next few years.
The Bill seeks to establish the NaBFID to support the development of long-term non-recourse infrastructure financing in India, including the development of the bonds and derivatives markets necessary for infrastructure financing.
As per the statement of objects and reasons of the Bill, it seeks to enable the Central government, multilateral institutions, sovereign wealth funds, and such other institutions to hold equity in the NaBFID.
It proposes to enable the institution to provide financial assistance to infrastructure projects located in India or partly in the country and to enable the company to borrow or raise money by way of loans both in rupees and foreign currencies.
It also provides adequate safeguards for decision-making to address risk aversion and proposes the establishment of other development financial institutions, in addition to the NaBFID established under the proposed legislation.
“The institution shall have both developmental and financial objectives. Among other things, this would include developing a deep and liquid bond market of international standards for long-term infrastructure financing in India including through widening of the issuer and investor base,” it said.
It would also facilitate the development of markets for interest rate derivatives, credit derivatives, currency derivatives, and such other innovative financial instruments as may be necessary for infrastructure financing, it said.
“The financing objectives would involve establishing a credible framework that attracts equity investments from domestic and global institutional investors as well as debt investments, including green finance, from investors, aligned to their risk appetite and asset-liability profile, in order to cater to the financing needs of Indian infrastructure sector,” it said.
The government will provide the institution with grants and contributions, guarantees at concessional rates for foreign borrowings, and any other concessions, the Bill said, adding that dilution or sale of stake may be considered once the NaBFID has achieved stability and scale.
The Bill proposes to establish the head office of the institution in Mumbai and permits to form subsidiaries or joint ventures or branches, in India or outside.
