A Bank For Infra

THE NATIONAL BANK FOR FINANCING INFRASTRUCTURE AND DEVELOPMENT PROMISES TO ADDRESS THE CAPITAL NEEDS OF THE CASH-STARVED INFRASTRUCTURE SECTOR, BUT EXECUTION REMAINS KEY

- Joe C. Mathew

On March 25, the last day of the Covid-19 curtailed Budget Session of Parliament, the government passed a Bill that turned the clock 30 years back to India’s pre-economic liberalisation era in terms of infrastructure financing.

The proposed law that the Rajya Sabha cleared that day (the Lok Sabha had passed it two days earlier) was the National Bank for Financing Infrastructure and Development (NBFID) Bill, 2021. It called for the establishment of a development finance institution (DFI), a tried and tested concept that had led to the birth of institutions, including IFCI (Industrial Finance Corporation of India), IDBI (Industrial Development Bank of India), SIDBI (Small Industries Development Bank of India), NABARD (National Bank for Agriculture and Rural Development), etc., in the past.

The concept of statutory DFIs was junked by the Narasimha Rao government in 1991 and those that came into existence since then have been corporate entities registered under the Companies Act — institutions such as IDFC (Infrastructure Development Finance Company) and IIFCL (India Infrastructure Finance Company Ltd) — and not organisations created through special legislations.

The enactment of this law has cleared the way for the birth of NBFID, the first Parliament-backed institution for infrastructure financing in three decades. If all goes according to schedule, setting up of the institution, appointment of its board of governors and operating management etc should be over by the second half of 2021/22.