Tag: NaBFID

Banks Board Bureau to soon start appointment process for MD, DMDs at NaBFID, BFSI News, ET BFSI

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The government had recently said that beginning October 2021, all pens would be taxed at 18%.

The finance ministry will soon start the process for the appointment of managing director (MD) and deputy managing directors (DMDs) of the newly set up Rs 20,000 crore development finance institution NaBFID, to catalyse investment in the fund-starved infrastructure sector.

Last month, the government appointed veteran banker KV Kamath as the chairperson of the National Bank for Financing Infrastructure and Development (NaBFID) for three years.

The finance ministry will soon intimate the Banks Board Bureau (BBB) about the appointment of MD and DMDs of NaBFID.The Bureau will issue advertisements and undertake a selection process, sources said.

The BBB is the headhunter for state-owned banks and financial institutions. The MD, DMDs and whole-time directors would not hold office after attaining the age of 65 years and 62 years respectively.

As per the National Bank for Financing Infrastructure and Development (NaBFID) Act, 2021, the institution would have one MD and not more than three DMDs.

The national infra bank

The government has committed a Rs 5,000-crore grant over and above Rs 20,000 crore equity capital. The central government will provide grants by the end of the first financial year. The government will also provide a guarantee at a concessional rate of up to 0.1 per cent for borrowing from multilateral institutions, sovereign wealth funds, and other foreign funds.

The development finance institution (DFI) has been established as a statutory body to address market failures that stem from the long-term, low margin and risky nature of infrastructure financing.

The DFI, therefore, has both developmental and financial objectives. To begin with, the institution will be 100 per cent government-owned.

It will help fund about 7,000 infra projects under the National Infrastructure Pipeline (NIP) which envisages an investment of Rs 111 lakh crore by 2024-25.

The DFI will remain outside the purview of CAG, CVC and CBI, a move aimed at enabling faster decision-making. The government expects the DFI to leverage this fund to raise up to Rs 3 lakh crore in the next few years.

Development finance institutions

During the pre-liberalised era, India had DFIs which were primarily engaged in the development of the industry. ICICI and IDBI, in their previous avatars, were DFIs. Even the country’s oldest financial institution IFCI Ltd functioned as a DFI.

In India, the first DFI was operationalised in 1948, with the setting up of the Industrial Finance Corporation of India (IFCI).

Subsequently, the Industrial Credit and Investment Corporation of India (ICICI) was set up with the backing of the World Bank in 1955. The Industrial Development Bank of India (IDBI) came into existence in 1964, to promote long-term financing for infrastructure projects and industry.



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Finmin to soon start process for appointment of MD, DMDs of Rs 20,000 cr NaBFID, BFSI News, ET BFSI

Banking & Finance

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The finance ministry will soon start the process for the appointment of managing director (MD) and deputy managing directors (DMDs) of the newly set up Rs 20,000 crore development finance institution NaBFID, to catalyse investment in the fund-starved infrastructure sector.

Last month, the government appointed veteran banker K V Kamath as the chairperson of the National Bank for Financing Infrastructure and Development (NaBFID) for three years.

According to sources, the finance ministry will soon intimate the Banks Board Bureau (BBB) about the appointment of MD and DMDs of NaBFID.

The Bureau will issue advertisements and undertake a selection process, sources said.

The BBB is the headhunter for state-owned banks and financial institutions.

The MD, DMDs and whole-time directors would not hold office after attaining the age of 65 years and 62 years respectively.

As per the National Bank for Financing Infrastructure and Development (NaBFID) Act 2021, the institution would have one MD and not more than three DMDs.

The government has committed Rs 5,000 crore grant over and above Rs 20,000 crore equity capital.

The central government will provide grants by the end of the first financial year. The government will also provide guarantee at a concessional rate of up to 0.1 per cent for borrowing from multilateral institutions, sovereign wealth funds, and other foreign funds.

The development finance institution (DFI) has been established as a statutory body to address market failures that stem from long-term, low margin and risky nature of infrastructure financing.

The DFI, therefore, has both developmental and financial objectives. To begin with, the institution will be 100 per cent government owned.

It will help fund about 7,000 infra projects under the National Infrastructure Pipeline (NIP) which envisages an investment of Rs 111 lakh crore by 2024-25.

The DFI will remain outside the purview of CAG, CVC and CBI, a move aimed at enabling faster decision-making.

The government expects the DFI to leverage this fund to raise up to Rs 3 lakh crore in the next few years.

During the pre-liberalised era, India had DFIs which were primarily engaged in the development of industry.

ICICI and IDBI, in their previous avatars, were DFIs. Even the country’s oldest financial institution IFCI Ltd functioned as a DFI.

In India, the first DFI was operationalised in 1948, with the setting up of the Industrial Finance Corporation of India (IFCI).

Subsequently, the Industrial Credit and Investment Corporation of India (ICICI) was set up with the backing of the World Bank in 1955.

The Industrial Development Bank of India (IDBI) came into existence in 1964, to promote long-term financing for infrastructure projects and industry.



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NABFID brought under Dept of Financial Services purview

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President Ram Nath Kovind approved placing the National Bank for Financing Infrastructure and Development (NABFID) under the purview of the Department of Financial Services (DFS) in the Finance Ministry for administration purposes.

In a notification issued by the Cabinet Secretariat, “Administration of the National Bank for Financing Infrastructure and Development Act, 2021 and related matters,” has been allocated under Business Rules of the Government to Department of Financial Services. It has been made effective immediately.

New development financial institution

The National Bank for Financing Infrastructure and Development Act was enacted by Parliament in March. With this, a new development financial institution will come into existence. It will have both developmental and financial objectives. Among other things, this would include developing a deep and liquid bond market of international standards for long-term infrastructure financing in India, including through widening of the issuer and investor base.

It will also facilitate the development of markets for interest rate derivatives, credit derivatives, currency derivatives and other such innovative financial instruments as may be necessary for infrastructure financing. The financing objectives would involve establishing a credible framework that attracts equity investments from domestic and global institutional investors as well as debt investments, including green finance, from investors, aligned to their risk appetite and asset-liability profile, in order to cater the financing needs of Indian infrastructure sector.

According to the Act, debt securities, including bonds and debentures, issued by the Institution should be considered as eligible for purposes such as approved investments, securities, etc., as per limits and conditions to be prescribed by Indian financial regulators for their regulated entities. The Institution will also be empowered to lend to, or invest in, infrastructure projects located in India, or partly in India and partly outside India, prioritising systemic risk mitigation, credit enhancement, subordinate debt, debt maturities suited to project life spans and to raise long-term finance for the same.

The act also prescribed that the Institution may be involved in project structuring, monitoring and monetisation of completed projects by itself or through its subsidiaries, etc., promoting innovation in financial products and services including by issuing long-term bonds with explicit or implicit sovereign guarantee, underwriting and dealer services. Overall, “the Institution shall provide a supporting, technology enabled ecosystem across the life cycle of infrastructure projects as a provider, enabler and catalyst for sustainable infrastructure financing in India with the backing of the Government. The Institution shall support the bond market with the aim of fostering complementarity of market raised debt with lending for infrastructure projects,” the Act said.

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No plan to merge IIFCL with new NaBFID, says IIFCL Chief Jaishankar

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India Infrastructure Finance Company Ltd (IIFCL), a State-owned entity, on Tuesday made it clear that it was not looking to merge itself with the newly set up National Bank for Financing Infrastructure and Development (NaBFID), which is being positioned as the principal Development Financial Institution (DFI) for infrastructure financing in the country.

“There are no such plans. We have our plans for the future for IIFCL. Of course we would like to take the objectives of the Government forward. That is very very clear”, P.R.Jaishankar, Managing Director, IIFCL said when asked if there are any plans to merge IIFCL with NaBFID.

Stating that IIFCL would like to position itself as a leading innovative infrastructure lender, Jaishankar said that the institution would continue to roll out new innovative products in the infrastructure financing space in the coming days.

Net profit of ₹ 325 crore

IIFCL on Tuesday reported a consolidated net profit of ₹ 325 crore for the financial year ended March 31, 2021. This was a 246 per cent increase over net profit of ₹ 94 crore recorded in the previous year. During 2020-21, IIFCL recorded the highest ever sanctions and disbursements of ₹ 20,892 crore and ₹ 9,460 crore respectively, on a standalone basis.

Also read: The new DFI must look beyond financing

On capital raising plans, Jaishankar said that IIFCL was adequately capitalised and had capital adequacy ratio of 31 per cent. “With this capital adequacy, there is potential to do additional business of ₹ 50,000 crore. The additional capital is required thereafter”, Jaishankar said.

Jaishankar however noted that IIFCL could raise debt resources of about ₹ 15,000 crore this fiscal to fund growth. Pawan Kumar, Deputy Managing Director, IIFCL clarified that the entire ₹ 15,000 crore will be mobilised from the domestic markets.

Keeping with its strategic intent to strengthen the monitoring and surveillance systems through digitalisation, IIFCL is now in the process of putting in place an online project monitoring system, first of its kind in India, for real-time project monitoring during construction phase by integrating high-end solutions like Drones, AI etc.

Also, IIFCL is in the process of establishing an in-house research and advisory wing, which would enable the institution in further bolstering its capabilities to provide policy advocacy, feedback, remedial action, innovative products and processes to government, regulatory bodies, project authorities and other stakeholders, Jaishankar said.

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