The National Bank for Financing Infrastructure and Development Bill, 2021 was introduced in Lok Sabha on March 22, 2021. The Bill seeks to establish the National Bank for Financing Infrastructure and Development (NBFID) as the principal development financial institution (DFIs) for infrastructure financing. DFIs are set up for providing long-term finance for such segments of the economy where the risks involved are beyond the acceptable limits of commercial banks and other ordinary financial institutions. Unlike banks, DFIs do not accept deposits from people. They source funds from the market, government, as well as multi-lateral institutions, and are often supported through government guarantees.

The National Bank For Financing Infrastructure And Development Act, 2021 receives President’s assent on March 28, 2021. The Act seeks to establish the National Bank for Financing Infrastructure and Development (NaBFID) to fund infrastructure projects in India. The salient features of the Act are discussed below.

Establishing NaBFID: The National Bank for Financing Infrastructure and Development will be established as a Development Financial Institution (DFI) for infrastructure financing. The authorised share capital of the Institution shall be one hundred thousand crore rupees divided into ten thousand crores of fully paid-up shares of ten rupees each. Shares of the Institution may be held by the Central Government, multilateral institutions, sovereign wealth funds, pension funds, insurers, financial institutions, banks etc.

Purpose of NaBFID: The developmental objective of the Institution shall be to coordinate with the Central and State Governments, regulators, financial institutions, institutional investors and such other relevant stakeholders, in India or outside India, to facilitate building and improving the relevant institutions to support the development of long-term non-recourse infrastructure financing in India including the domestic bonds and derivatives markets.

The financial objective of the Institution shall be to lend or invest, directly or indirectly, and seek to attract investment from private sector investors and institutional investors, in infrastructure projects located in India, or partly in India and partly outside India, with a view to foster sustainable economic development in India.