Lending Target of NaBFID

March 26, 2022

A target of Rs 1 trillion has been set by the government for the National Bank for Financial Infrastructure and Development (NaBFID) to sanction loans to the country’s infrastructure sector in the upcoming financial year.

Overview:

This new Development Finance Institution (DFI) will commence its operations in the first quarter of the upcoming financial year.
The DFI has plans to invest in various infrastructure projects to catalyse investment in the infrastructure sector.
Funding will be given to projects in India as well as outside the country while credit enhancement and systemic risk mitigation will be prioritised.
The Department of Financial Services (DFS) is setting up plans to make the newly formed DFI functional and the Rs 1-trillion target will be operationalized.
In 2021, KV Kamath was appointed as the chairman of NaBFID.

Funds infused by the Government

Rs 20,000 crore has been infused by the government as equity in the DFI. Also, Rs 5,000 crore has been provided to NaBFID as grants.

NaBFID with a Rs 20,000 crore capital base, will be able to provide funding to several projects in the public and private sectors.

What will be the function of NaBFID?

NaBFID will look to plug the gap prevalent in the country’s infrastructure financing as banks are wary to invest in long projects. A 10-year tax concession has been provided to this DFI so long-term funds at an affordable cost can be provided by this organization to the infrastructure sector. This institution will also act as a market maker to broaden the bond market. It will also issue debt securities and will be promoting securitisation of the loan portfolio of all the companies that are engaged in developing the infrastructure sector. The DFI will also be able to procure government guarantees at a concessional rate for borrowing from sovereign wealth funds, multilateral institutions, etc.

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