Regardless of new financial institution being out of purview of CBI, CVC and CAG, Parliament to supervise it: Sitharaman

Sandeep Dikshit

Today News Online Service

New Delhi, March 25

The Rajya Sabha on Thursday passed the bill for setting up the National Bank for Financing Infrastructure and Development (NaBFID). It will remain out of purview of the three ‘Cs’- CBI, CVC and CAG – and will be privatised with the government eventually holding 26 per cent of the equity stake, said Union Finance Minister Nirmala Sitharaman while replying to the debate.

Responding to concerns raised by Jairam Ramesh (Congress) and others, Sitharaman sought to assuage their apprehensions by stating that “NaBFID is not beyond overseeing. The audited reports will be submitted in both Houses of Parliament and it is duty-bound to submit as and when sought by the government.’’

Sitharaman also referred to the Act’s clause stipulating that the institution would furnish to the Centre and RBI within four months of closing of its financial year, a copy of its balance sheet, accounts and auditor’s report.

The sovereign guarantee by the bank will not be blanket but an enabling provision that can be invoked by the government, she said.

Sitharaman said, “Development finance is highly risky and has long gestation. Scheduled banks entering this domain cause asset-liability because they provide short-term finance for long-term projects. This mismatch is not good for the financial sector.’’

Another point that she underlined was that it is not as if the NaBFID would be dependent only on FDI. Indian infrastructure will have to be largely funded by Indian investment, she agreed. And the bank will attempt to create an ecosystem that will facilitate that besides deepening the bond markets.

The Finance Minister said the bank would be professionally run with the government appointing the chairman. But all other appointments will be made by the Banking Bureau Board.

The government will provide Rs 5,000 crore as grant and Rs 20,000 crore equity capital to help fund about 7,000 infra projects under the National Infrastructure Pipeline (NIP).

The legislation will give effect to Sitharaman’s Budget announcement.

As per the statement of objects and reasons of the Bill, it seeks to enable the central government, multilateral institutions, sovereign wealth funds, and such other institutions to hold equity in the NaBFID.

It proposes to enable the institution to provide financial assistance to infrastructure projects located in India or partly in the country and to enable the company to borrow or raise money by way of loans both in rupees and foreign currencies.

It would also facilitate the development of markets for interest rate derivatives, credit derivatives, currency derivatives and such other 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 to the financing needs of Indian infrastructure sector,” it said.

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