The responsibility of National Bank for Financing Infrastructure and Development has been given to the Finance Department of the Ministry of Finance. It has also been implemented with immediate effect. In the same year, a bill is passed in the Lok Sabha regarding this.
In order to provide necessary funds for infrastructure development, the government has taken another big step. The responsibility of National Bank for Financing Infrastructure and Development has been given to the Department of Financial Services (DFS), Ministry of Finance. According to the information received from the notification, it has also been implemented with immediate effect. This decision has been taken by the Government of India under the 363rd amendment of the Work Allocation Rules. In March this year, the National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021 was passed in Parliament. This bill was passed in Lok Sabha on 23 March 2021 and in Rajya Sabha on 25 March 2021.
NABFID will now be the premier Development Financial Institutions (DFIs) for infrastructure financing in the country. When commercial banks are not in a position to take high risk in a particular segment of the economy, then DFI is created. These institutions other than banks do not accept deposits from the general public. The major sources of funds for these institutions are market, government, multilevel institutions. Sometimes they also get government guarantee. Under this bill, any person can open a DFI by applying to RBI. After the application, RBI can issue the license after talking to the central government. RBI will also decide its regulation.
What will be the structure of NBFID and how will it work?
The National Bank for Financing and Development (NABFID) has been set up as a corporate body. Initially, Rs 1 lakh crore will be put in it as share capital. NABFID may be held by the Central Government, Multilateral Institutions, Sovereign Wealth Funds, Pension Funds, Insurance Companies, Financial Institutions, Banks and other Central Government Institutions. However, initially, the central government will have 100% stake in it. In future it can be brought down to 26 per cent.
Will NABFID work?
Mainly NABFID is being brought for two purposes. The first is financial and the second is development work. Its first task will be to directly or indirectly invest or bring investment in any infrastructure project in whole or in part in the country. It will be decided by the central government only. Apart from this, bonds, loans or derivatives will have to be facilitated for infrastructure financing in the country. You can also understand it in the following way-
- Providing loans and advances for infrastructure projects.
- Takeover or refinance old or existing loans.
- Bringing investment from private sector investors and institutional investors for infrastructure projects.
- To increase the participation of foreign institutions for infrastructure projects.
- Resolving disputes with government authorities regarding infrastructure financing.
- To provide consultancy facility for infrastructure financing.
From where will NABFID get the funds?
NABFID will raise loans in Indian or foreign rupees. Apart from this, one can also raise funds by issuing or selling bonds and debentures. Apart from this, it can also borrow from the Central Government, Reserve Bank of India, commercial banks, mutual funds and the World Bank or Asian Development Bank.
How will the central government support NABFID?
By the end of the current financial year, the central government will infuse a capital of Rs 5,000 in it. At the same time, the central government will also guarantee 0.1 percent rebate on borrowing from multi-level institutions. It is also possible that the central government should also compensate for the difference in the rupee in comparison to the foreign currency. NABFID can also issue Bonds, Debentures and Loans on request.
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