National Bank for Financing Infrastructure and Development (NaBFID)

Table of Contents

The Government of India (GOI) set up NaBFID in April 2021 as India’s fifth All India Financial Institution in the country to support the development of long-term non-recourse infrastructure financing in India, including the development of the bonds and derivatives markets necessary for infrastructure financing. NaBFID has both developmental and financial objectives.
It supports the country’s infrastructure sector by bridging the financing gap in the infrastructure sector, enabling credit flow through innovative instruments such as longer tenor loans, blended finance, partial credit enhancement, takeout financing, and facilitate crowding-in of infrastructure finance.
Statutory Body: Established under the National Bank for Financing Infrastructure and Development Act, 2021
Stake: Presently Govt. holds 100% equity but later on it will reduce its stake/ownership to 26%.
Capital: The authorised share capital of the Institution is ₹ 1 lakh crore.
Regulated by: It is regulated and supervised by RBI as an All-India Financial Institution (AIFI) under sections 45L and 45N of the RBI Act, 1934.

Objectives

NBFID will have both financial as well as developmental objectives:

Financial objectives will be to directly or indirectly lend, invest, or attract investments for infrastructure projects located entirely or partly in India.
Developmental objectives include facilitating the development of the market for bonds, loans, and derivatives for infrastructure financing.

Functions of NaBFID

Extending loans and advances for infrastructure projects
Taking over or refinancing such existing loans
Attracting investment from private sector investors and institutional investors for infrastructure projects
Organising and facilitating foreign participation in infrastructure projects
Facilitating negotiations with various government authorities for dispute resolution in the field of infrastructure financing
Providing consultancy services in infrastructure financing.

Source of Funds

NaBFID may raise money in the form of loans(both in Indian rupees and foreign currencies) or raise money by the issue and sale of various financial instruments including bonds and debentures.
NaBFID may borrow money from: (i) central government, (ii) Reserve Bank of India (RBI), (iii) scheduled commercial banks, (iii) mutual funds, and (iv) multilateral institutions such as World Bank and Asian Development Bank.

Significance of NaBFID

Bridges the infrastructure finance gap by providing patient capital for long-gestation projects.
Supports economic growth through multiplier effects of infrastructure development.
Reduces burden on banks and NBFCs by creating an alternative channel for infra lending.
Enhances ease of doing business through better infrastructure.
Attracts global investors by offering structured products and improving project bankability.
Complements government initiatives like PM Gati Shakti, Make in India, and National Monetization Pipeline.

The National Bank for Financing Infrastructure and Development (NaBFID) represents a strategic shift in India’s approach to infrastructure financing. By providing long-term, stable, and structured finance, NaBFID aims to fill the institutional void in infrastructure funding. It not only boosts public-private partnership in the sector but also supports India’s ambition to become a $5 trillion economy.

FAQs

Q1. What is NaBFID and when was it established?

NaBFID is a Development Financial Institution (DFI) established in 2021 under the NaBFID Act, 2021 to provide long-term infrastructure financing.

Q2. What distinguishes NaBFID from commercial banks?

Unlike banks, NaBFID focuses exclusively on infrastructure financing and operates with a long-term outlook, providing patient capital and credit enhancement services

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