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

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.