The Lok Sabha has passed the National Bank for Financing Infrastructure and Development Bill, 2021 on 23 March, 2021. The said Bill provides for the establishment by the Central Government of the National Bank for Financing Infrastructure and Development (“NaBFID”), a development financial institution, with the goal of supporting the development of long term, non-recourse infrastructure financing in India and the development of the bonds and derivatives markets necessary for such financing.
It is expected that the risks involved in infrastructure financing due to higher credit costs, high risk of delay and failure of projects will be addressed by NaBFID in coordination with the Central and State Governments, regulators, financial institutions, institutional investors and other relevant stakeholders, in India or outside India. Overall, the NaBFID will provide a supporting, technology enabled ecosystem across the life-cycle of infrastructure projects as a provider, enabler and catalyst for infrastructure financing in India. Over the medium to long term, such support to the bond market is likely to foster complementarity of market raised debt with direct lending by the NaBFID.
Our Role: We drafted the NaBFID Bill and advised the Department of Financial Services, Government of India on it.
SAM & Co Team: Anurag Dwivedi, Partner, Pratik Datta, Senior Research Fellow, Gautam Mudgal, Senior Associate and Adya Jha, Associate.
Overall Guidance: Shardul Shroff, Executive Chairman
The salient features of the Bill are as follows:
While the NaBFID is the principal DFI, any person can set up a DFI on making an application to the RBI for a licence, which may be granted in consultation with the Central Government subject to terms and conditions specified by it through regulations.
Objectives of NaBFID: The objectives of NaBFID are twofold, developmental and financial. On the development front, it will coordinate with the Central and State Governments, regulators, financial institutions, institutional investors and other relevant stakeholders, whether in India or outside, to facilitate building and improvement of relevant institutions to support the development of long-term non-recourse infrastructure financing in India, including the domestic bonds and derivatives markets.
On the financial front, NaBFID will lend or invest, directly or indirectly,take over or refinance existing loans; transfer loans and advances granted by it; subscribe to or purchase, underwrite, acquire, hold or sell stocks, shares, bonds, debenture stocks, debt securities; borrow or raise money. Overall, it is expected to attract investments from the private sector and institutional investors in infrastructure projects located in India or partly in India.
Management of NaBFID : The management, direction and general superintendence of NaBFID will be undertaken by a Board of Directors (the “Board”), acting on business principles and in consonance with the provisions of the Bill. The Bill provides for the composition, terms of office and service conditions of the Chairperson and other members of the Board as well.
The Government shall prescribe a concessional rate of fees upto 0.1 per cent., at which Government guarantee may be extended to NaBFID for borrowings from multilateral institutions, sovereign wealth funds and such other foreign institutions as may be provided by rules made by the Central Government. The Government will also reimburse, partly or fully, any hedging costs incurred in connection with any borrowing of foreign currency by NaBFID for the purposes of granting loans and advances or its repayment, so as to insulate NaBFID from any fluctuations in rates of exchange.
The Bill also prohibits any investigation agency, including the Police, Central Bureau of Investigation, Serious Fraud Investigation Office, Directorate of Enforcement and other agencies from conducting any inquiry/investigation into any alleged offence committed in relation to any recommendation made or decision taken by the Chairperson or other directors, employees or officers of NaBFID in discharge of his official functions or duties, without the previous approval of the competent authority specified therein.
To refer to the National Bank for Financing Infrastructure and Development Bill, 2021 as passed by Lok Sabha, click here.
The Bar Council of India does not permit solicitation of work and advertising by legal practitioners and advocates. By accessing the Shardul Amarchand Mangaldas & Co. website (our website), the user acknowledges that: