NaBFID will begin lending from April to June qtr; to support infra financing up to Rs 1 lakh cr in FY’23
The newly formed National Bank for Infrastructure and Development Finance (NaBFID) is gearing up to start operations in the April to June quarter and is targeting financial assistance of Rs 1 lakh crore in its first year of operation .
In the Union Budget 2021-2022, Finance Minister Nirmala Sitharaman announced that the government would establish a Development Finance Institution (DFI) to catalyze investments in the fund-strapped infrastructure sector.
Later, Parliament enacted the National Bank for Infrastructure and Development Finance Act 2021 for the establishment of NaBFID of Rs 20,000 crore as a DFI.
In the April to June quarter, the processing of loans would start, sources said, adding that the institution is targeting loan relief of a whopping Rs 1 lakh crore in the next financial year.
Additionally, potential bridging funding for the monetization program is being explored, the sources said.
This will give a massive boost to infrastructure projects, which are part of the National Infrastructure Pipeline (NIP), they added.
Building such a large organization, from announcing the budget to passing the bill and appointing board members in less than 10 months, is a feat in itself, the officials said. sources, adding that the eagerness with which the legislation was introduced in the second round of the budget session indicates that the groundwork was done well in advance.
The DFI was established for the purpose of supporting the development of long-term non-recourse infrastructure finance in India, including the development of bond and derivatives markets necessary for infrastructure finance and to carry on the infrastructure finance business. .
In October, the government appointed veteran banker KV Kamath chairman of NaBFID for three years. He also named two government-appointed directors to the board.
Furthermore, the sources said that a task force has been established and the mobilization of suitable manpower from major banks and financial institutions is underway. Consultants have been engaged to assist and support the establishment of NaBFID.
The NaBFID was created as a statutory body to address market failures that arise from the long-term, low-margin and risky nature of infrastructure financing.
It will help finance about 7,000 infrastructure projects under the NIP, which envisages an investment of Rs 111 lakh crore by 2024-25.
Infrastructure spending has a multiplier effect on the economy. This means that not only does the project contribute immediately through increased demand for labor and construction materials, but also through second-order effects in terms of improved connectivity.
Various studies have estimated the multiplier to be between 2.5 and 3.5 times. Thus, for every rupee spent by the government to create infrastructure, the GDP gains are worth 2.5 to 3.5 rupees.
According to NITI Aayog, in times of economic contraction, this multiplier is greater than that in times of economic expansion. This could imply that public investment, if timely and well targeted, can actually ‘crowd in’ private investment, rather than ‘crowd it out’.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)