Lok Sabha Passes National Bank For Financing Infrastructure And Development (NBFID) Bill 2021


The Lok Sabha passed the National Bank for Financing Infrastructure and Development (NBFID) Bill 2021 in parliament on Tuesday 23, which was earlier announced in union budget 2021-22.

The bill was tabled in Lok Sabha on previous day, Monday 22, by Finance Minister Nirmala Sitharaman.

This bill seeks to establish a national bank, head quartered in Mumbai with branches in other cities, with sole purpose to lend long term capital to infrastructure projects, development of bonds and derivatives markets to lend long-term capital to infrastructure.

Minister Sitharaman said, this bill will seek to address market failure to finance long term infrastructure, due to low-margin and high-risks involved in infra financing.

The bank will be wholly owned by union government, in order to foster confidence in its stability and raise capital at competitive rates.

“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 government said in the Bill.

The bank will be given initial grans and contributions, capital of Rs. 20,000 crore is already allotted in union budget 2021-22, other guarantees will be provided at concessional rates for foreign borrowings.

Minister Sitharaman also said, 7,000 infrastructure projects have already been identified at state and central level.

The bills allow bank to lend capital indirectly by funding other institutions involved in financing infrastructure, acquiring business other institutions, bill read “acquire an undertaking including the business, assets and liabilities of any institution, the principal object of which is the promotion or development of infrastructure financing for projects located in India, or partly in India and partly outside India”.

The bank will borrow money from central government, scheduled banks and financial institutions, mutual funds, pensions, LIC and other institutions notified by government.

The new bank is also likely to receive tax exemptions in accordance with newly institutionalised DFIs, however, minister has given more details on nature of tax exemptions yet.