This article is written by Pranjali Aggarwal of the University Institute of Legal Studies, Punjab University, Chandigarh. This article discusses all the aspects of the National Bank for Financing Infrastructure and Development Act, 2021.
Table of Contents
The formation of the National Bank for Financing Infrastructure and Development was first discussed by the Finance Minister Ms. Nirmala Sitaraman in her budget speech of the year 2021-22. She remarked it as the pre-eminent Development Finance Institution (DFI) of the country.
The Bill for the National Bank for Financing Infrastructure and Development Act, 2021 was presented in the Parliament on 22nd March 2021. It was passed in Lok Sabha on 23rd March 2021 and in Rajya Sabha on 25th March 2021. The Act, after the assent of the President, came into force on 28th March 2021. The Act led to the incorporation of the National Bank for Financing Infrastructure and Development (NBFID). With its enactment, the government is targeting the development of infrastructure financing in the country. The NBFID will play an imperative role in the construction of the infrastructure pipeline project that is worth Rs. 111 lakh crore.
Development Financial Institution (DFI)
The major function of the DFI is to help in the development of various sectors by providing them sources of financing. These are also called development banks. The concept of DFI is not naive for India. The existence of the development financial institutions in India dates back down to the year 1948. In 1948, India’s first DFI, the Industrial Financial Corporation of India was established. There were several DFIs that were incorporated nationally and internationally like the Industrial Credit and Investment Corporation of India (ICICI), World Bank, etc.
The concept of DFI saw a decline in the role during the Narasimha Rao government in the year 1991. After the reforms of 1991, the public funding was reduced for the DFIs which did not yield positive results. The trend of bank credit and external borrowing came back. The passing of the NBFID Act, 2021 has led to the resurrection of DFIs in the country through the establishment of the NBFID.
Reasons for the enactment of the NBFID Act, 2021
There are primarily two objects of the NBFID Act, 2021. They are enumerated in Sections 4(2) and 4(3) of the Act, which are as follows:
The NBFID Act, 2021 aims to arrange investment for infrastructure projects that are situated entirely in India or partly in India. This can be done by lending or investing either directly or indirectly or to look and arrange investments from the private sector investors and institutional investors for the infrastructure projects. This will help to foster sustainable economic development in the economy.
- The NBFID Act, 2021 focuses on the development of the bonds and derivatives market of the country. It is done by taking the key stakeholders of the process on board and building cooperation among them.
- It also encourages the development of infrastructure assets in areas listed under the updated ‘Harmonized Master List of Infrastructure Sub-Sectors’ released by the Ministry of Finance.
- Basically, the Act aims to assist in the development of long-term non-recourse infrastructure financing in India.
Establishment of NBFID
- Section 3 of the Act provides for the establishment of the National Bank for Financing Infrastructure and Development (Institution). The NBFID will hold a perpetual existence under a common seal just like any other corporate entity.
- The head office of the Institution will be based in Mumbai. Any other offices, branches, or agencies can be set up at any place (either in India or outside India) by the Institution according to the requirement.
Structure of the NBFID
The structure of the NBFID is as follows:
Authorized share capital
- According to Section 5 of the Act, the authorized share capital of the institution is prescribed to be one hundred thousand crore rupees.
- The total capital is divided into ten thousand crores fully paid shares (the whole amount of money is received at once and no outstanding amount is left). Each share will be priced at Rs. 10.
- The Board of the Institution has the power to alter the face value of the shares and thus, divide the capital into shares (of a different value) accordingly.
- The Board after consulting with the Central Government can increase or decrease the authorized capital of the Institution. The only condition is that in any situation, the shares issued should be fully paid-up shares.
- The Board, after taking the approval of the Central Government, can decrease the share capital of the institution. The method adopted for this purpose is buy-back of shares which means the company repurchases its shares from the market.
- According to Section 5 of the Act, the shares of the Institution may be held by the Central Government, multilateral institutions, sovereign wealth funds, pension funds, insurers, financial institutions, banks, and any other institution that is allowed.
- The Central Government should hold at least twenty-six percent of the shares of the institution in every circumstance.
Board of Directors of the Institution and their powers
Chapter III of the Act deals with the Board of Directors and Management of the Institution.
Section 6 of the Act enumerates the composition of the Board of Directors. The Board of Directors include the following:
- A Chairperson that is appointed by the Central Government according to the advice of the Reserve Bank.
- A Managing Director that is appointed by the Board as per the recommendations of the Bureau (as per Section 2(c) of the Act, Bureau refers to the body notified by the central government for appointment and removal of the directors).
The appointment will be done according to the guidelines and criteria set by such agencies that are determined by the Central Government.
- Three Deputy Managing Directors are appointed by following the same procedure as that of the Managing Director.
- Two Directors will be nominated by the Central Government chosen from the officials of the Central Government.
- At most three directors are to be elected by shareholders. The shareholders, except for the Central Government, who owns at least ten percent of the total issued equity share capital can nominate one director.
- Independent directors can be appointed by the Board according to the recommendations of the Nomination and Remuneration Committee. The number of independent directors will be either three or one-third of the total number of the directors on the Board, whichever number will be higher.
- At least one of the directors mentioned in clause (e) or (f) of Section 6(1) shall be a woman.
- If the condition for the appointment of the shareholders as per clause (e) of Section 6(1) is not fulfilled or when there is still time to take charge by the directors, then the Board can co-opt for appointment of not more than three directors. Such appointment of the co-opt directors is to be made according to the recommendations of the Nomination and Remuneration Committee.
- The Managing Directors or the Deputy Managing Directors will work as full-time Directors.
Powers of the board
- They are entitled to supervise and govern all the activities of the Institution. They can use all those powers and perform activities that can be performed by the Institution.
- They can also act in accordance with business principles but they should not be contrary to the provisions of the NBFID Act, 2021.
- According to Section 8 of the Act, the Board can delegate its powers or functions to the Directors or committees formed under this Act by adhering to the conditions and limitations as prescribed by the Act. This can be done either by passing general order or special order.
Disqualification and removal of the directors from the office
- Section 10 of the Act lays down provisions regarding the disqualification and removal of the directors from the office.
- This power is vested with the Central government and can be exercised in the following situations:
- If any director has been declared insolvent; or
- If he has become either physically or mentally incapable to act as the director; or
- If he has been convicted of such an offence that is moral turpitude (degradation) according to the Central Government; or
- If he has gained any sort of financial interest that will lead to biasness while exercising the powers and functions as the director.
- If he has abused his position, and the Central government opines that if he continues his office, it will be against the interest of the public.
- If he has been removed due to any reason from the service of:-
(i) The Government; or
(ii) Any bank including the Reserve Bank of India and the State Bank of India; or
(iii) Any public financial institution or state financial institution; or
(iv) Any other corporation owned or controlled by the government
- If the removal is to take place as per clauses (d) or (e), then he shall be given a sufficient opportunity to put forward his view.
- If any director has been elected as the Member of Parliament or any State Legislature, then he will cease to be a director of the Institution from the date he is elected or nominated at any such office.
- Section 11 of the Act envisages other situations in which the Chairperson or directors can be removed. The situations are as follows:
- The Central Government may remove the Chairperson and substitute him by appointing another person. This Central Government should exercise this power after consulting the Reserve Bank of India.
- Any director that is appointed as per the clauses (b), (c), or (f) of sub-section (1) of Section 6 can be removed by the Board of Directors after consulting the Bureau.
Committees of the Board
Section 15 of the Act envisages the provision for the formation of the committees of the Board. The formation of committees is the total discretion of the Board. The committees should perform their functions and follow procedures as may be specified by regulations.
- Nomination and Remuneration Committee, a Risk Management Committee, and an Audit Committee shall be formed by the Board. Each committee will comprise a minimum of three independent directors.
- An Executive Committee may be formed by the Board. It may consist of such a number of directors as the Board may deem fit.
- The Chairperson of the Institution shall not be a member of the Executive Committee. He cannot become a member of the Audit Committee and the Nomination and Remuneration Committee also after the first year.
Disclosure of the interest by members of Board or of Committees
Section 16 of the Act deals with the disclosure by the members of the Board and Committee regarding their interest in body corporate if any. In this Section, the ‘body corporate’ will have the same meaning as enumerated under Section 2(11) of the Companies Act, 2013 which includes:
- A company, a firm, a financial institution, or a scheduled bank or
- A public sector enterprise established or constituted by or under any Central Act or State Act; or
- Any other incorporated association of persons or body of individuals.
The provisions of the Section are as follows:
- The Director holding any interest in body corporate in the manner as referred to in this Section shall disclose it in the first meeting of the Board in which he participates as a Director; or
- In the cases where he has acquired interest subsequently after previous disclosures then he can disclose the same in the next meeting of the Board after such change.
- When any agreement, proposed contract, or arrangement has been entered into or is to be entered by the Institution with:-
- The body corporate in which director or directors in the association are holders of more than two percent of shares; or
- Director is the promoter, manager, chief executive officer or trustee of that body corporate; or
- A firm or other entity in which such director is a partner, owner, or member, as the case may be,
Then such directors either holding interest, directly or indirectly, are not entitled to participate in the meeting of the Board or of its Committee in the following cases:
- When such contract or arrangement will be deliberated upon;
- Or when such instruments are to be discussed in any way.
- The person holding such interest should disclose the same at the time of such meeting also.
- On the later discovery of the fact that the Institution entered into such contract or arrangement in which the director is interested and he did not disclose his interest according to Section 16(2), then such contracts are voidable at the option of the Institution.
- The employees who are part of the senior management of the Institution are also bound to disclose their personal interests relating to any financial, material, commercial transactions that can potentially act in conflict of the interest of the Institution.
- If any director acts in violation of the provisions laid down in Sections 16(1) or 16(2) or any employee that violates Section 16(4), then such individual is liable to pay a sum of Rs. 1 lakh as the penalty.
- Without prejudice to anything contained in sub-section (5) of Section 16, the Institution has the power to recover losses from the director or employee, if the Institution faced loss because they did not abide by the disclosure procedure.
Powers and functions of the Institution
Section 17 of the Act deals with the powers and functions of the Institution that are as follows:
- Can establish subsidiaries or joint ventures or branches either in India or outside India. Such establishment can be made for the following purposes:
- To delegate functions of the Board;
- Or an arrangement can be made to finance them;
- Or to guarantee any of their liabilities;
- Or any other arrangement that the Board may deem fit.
- Maintain coordination between the activities of the Institution and other units that are indulged in the field of infrastructure finance.
- The expert staff needed to study problems relating to infrastructure finance should be maintained by the Institution.
- They should provide consultation services to the Central Government, the Reserve Bank, and other institutions that are indulged in the field of infrastructure finance.
- They should establish trusts according to the Indian Trust Act, 1882. The primary function of the establishment of trusts is to create such funds that will help in the financing of infrastructure projects. Such infrastructure projects can be situated either wholly in India or partly in India and partly outside India.
- Facilitate in the development of a deep and liquid market for bonds, loans and derivatives for infrastructure financing including facilitating electronic and negotiated markets infrastructure, investor protection, adjudication infrastructure, etc.
- Lend and invest in the infrastructure projects situated in India, or partly in India and partly outside India. This can be done through following ways:-
- By underwriting credit, securitization of its receivables or,
- By way of any pass-through certificate or direct assignment, transfer or novation or,
- Through the usage of innovative financial tools including transactions secured by receivables from the project.
- To provide financial aid to any company, statutory corporation, trust or any financial institutions that are engaged in any infrastructure project either in India or partly in India or partly outside India. Financial aid can be provided by sanctioning loans or advances.
- To look after all the aspects regarding loans like refinancing, settling them, etc.
- To purchase, underwrite, acquire, hold or sell any type of securities (shares, debentures, bonds, etc) that are issued or guaranteed by any private firm or trust or government institution that are engaged in funding infrastructure projects situated in India or partly in India and partly outside India.
- They can borrow money from the Central Government, scheduled banks, financial institutions, mutual funds, any class of persons, and from any other institution or authority, or organization that is notified by the Central Government. The loan can be borrowed when there is a mismatch between assets and liabilities. It cannot be used to employ funds in business activities.
- To engage in buying, selling or any other dealing in foreign exchange, that is needed to discharge functions of the Institution.
- The Institution can opt for technical or professional services of the companies that are indulged in the field of infrastructure during the completion of the projects.
- In case of transactions or services concerning debt securities issued by infrastructure companies and financial institutions for the purpose of infrastructure projects, the Institution can play the role of intermediary. They can also provide credit enhancement facilities to such institutions.
- They can participate in the negotiations and discussions in the cases relating to infrastructure financing with the government authorities and stakeholders in order to ensure effective dispute resolution.
- They will apply, receive and manage all the grants, aids, donations, etc from all the national and international sources.
- They will work to encourage foreign participation in the projects of infrastructure development.
- They can enter into any other business or activity that is permitted by the Central Government after consulting with the Reserve Bank of India.
Functions that can either be performed by Institution itself or can be delegated to the subsidiaries or joint ventures
These functions are elucidated in Section 17(2) of the Act that are as follows:
- To encourage the participation of the Central Government, public sector, private sector, and institutional investors from India or overseas in infrastructure development projects located in India, or partly in India and partly outside India.
- To assist any person engaged in the infrastructure development projects regarding technical, legal, marketing, and administrative aspects.
- To provide consultancy services in the projects situated in or outside India, in matters like the development of infrastructure, structuring of project and capital, etc.
- To arrange for the facilities for training, dissemination of information, and promoting research activities. This can be done by issuing loans or grants.
- They can act as trustees in the case of securities and even undertake and execute any other trusts.
- They can also exert powers of executor, administrator, receiver, treasurer, custodian, and trust corporation.
- They prepare proposals and negotiate the final agreements with the investors and proponents of infrastructure projects regarding the infrastructure projects in India or partly in India and partly outside India.
- They can undertake acts or activities including sale or transfer of its assets that incidentally fall under their ambit while exercising the powers or abiding by the duties that are laid down by the Act or any other law for the time being in force.
Some businesses are expressly barred by the Act to be undertaken by the Institution. They are envisaged in Section 18 of the Act and are as follows:
- The Institution cannot provide loans or advances by keeping its own bonds and debentures as securities.
- The Institution is not entitled to issue loans or advances to any individual, or firms in which one or more directors hold power or are having substantial interest (the definition of ‘substantial interest’ given in Section 2(77) of the Companies Act, 2013 applies here). This provision does not apply to a borrower if any director of the Institution is nominated by the Institution or the Central Government as director on the Board of such borrower or is elected on the Board of such borrower by virtue of shares held in the borrower by the Institution.
Transactions with related party
There are some transactions elucidated in Section 19 of the Act with related parties that cannot be undertaken without the approval of the Board and fulfilling other requisites as prescribed by the Act. Such transactions are as follows:
- Sale, purchase, or supply of any goods or materials;
- Selling or otherwise disposing of, or buying, property of any kind;
- Leasing of property of any kind;
- Availing or rendering of any services;
- Appointment of any agent for purchase or sale of goods, materials, services, or property;
- Such related party’s appointment to any office or place of profit in the Institution, its subsidiaries or joint ventures or associate companies;
- Underwriting the subscription of any securities, or derivatives thereof, of the Institution.
The conditions that the above-mentioned activities are subject to, are as follows:
- The prior approval of the Board is needed to enter into any arrangement or transaction that involves a sum more than what is permitted by the regulation.
- Shareholders who are the related parties in the transaction are not allowed to cast a vote for its approval in the general meeting.
- If the Institution enters into any of the transactions referred above [Section 19(1)], then the Board should present a report stating the justification for entering into such a transaction to the shareholders.
Consequences of non-compliance with the provisions of Section 19
- If any transaction is entered into by any employee or director without adhering to the procedure of the consent from the authorized authority, then such transaction is voidable at the option of the Institution or shareholders. The Institution can recover the losses from the director if the transaction entered into by the Institution is with any related party of the director.
- Any director or employee acting in violation of Section 19 is liable to pay a penalty of a sum of upto twenty-five lakhs rupees.
Government grants, guarantees, and other contributions
Chapter V of the Act deals with government grants, guarantees, and other contributions, the provisions are as follows:
- According to Section 21 of the Act, the government can support the Institute by providing grants or contributions. These can be in the form of cash or marketable government securities.
- The Government must grant or contribute a sum of five thousand crore rupees after the end of the first financial year after the establishment of the Institute. This grant should not lead to any prejudice to the generality of the foregoing.
- According to Section 22 of the Act, the government should fix the concessional rate at not more than 0.1%, at which the borrowings can be taken from multilateral institutions, sovereign wealth funds, and any other foreign institutions that are prescribed by the government.
- According to Section 23 of the Act, the Central Government may reimburse the amount that the Institution is unable to pay relating to borrowings of foreign currency. This is done by the government to protect the Institution from the fluctuation of the rate of exchange.
Accounts, audit, and report
Chapter VI of the Act deals with the accounts, audits, and reports of the Institution.
Section 24 enunciates the provision regarding reserve funds for the Institution. The provision is as follows:-
- The reserve fund shall be created by the Institution. The Board will transfer such sums that the Board deems fit from the accrued profits of the Institution into the reserve fund. The sum transferred should not be less than twenty percent of the accrued annual profits of the Institution.
- The Board has to firstly ascertain and create provision for the following:
- Bad and doubtful debts,
- Depreciation of assets and
- For all other matters for which provision is necessary or expedient or which is usually provided for by bankers and
- Transfer such sum as deemed fit to reserve funds.
- After providing for all the above matters, the Board can calculate net profit and subsequently distribute the same as dividend to the shareholders.
Preparation of balance sheets and accounts of the Institution
Section 25 deals with the guidelines of preparing balance sheets and accounts of the Institution which are as follows:
- The balance sheet and other accounts are to be prepared as per the form and manner prescribed. No such rules have been prescribed yet.
- The closing date for the accounts and books of the Institution is the 31st day of March of every year or any other date decided by the Board.
Section 26 deals with provisions regarding audit of the Institution, that are as follows:
- The auditors who are qualified as per the provisions of Section 141 of the Companies Act, 2013 are only eligible to audit the accounts of the firm.
- They are appointed in the Annual General Meeting of the shareholders from the panel of the auditors that are prepared by the Reserve Bank of India. They are to be paid remuneration as fixed by the Reserve Bank.
- They will be provided with a copy of the balance sheet of the Institution. They need to study balance sheets, other books, and vouchers together.
- The auditor will also get the list of all the other books kept by the Institution. They are entitled to access all the books, accounts, vouchers, and other documents of the Institution at all reasonable times.
- The auditors have the power to examine any director or employee with respect to accounts of the Institution. They are entitled to receive such information or explanation from the Board or officers or other employees that are significant for the completion of the task of auditing.
- The auditors have to submit the report to the Institution regarding the audit of the accounts and balance sheet. The report should be lucid regarding their opinion on the following aspects:
- Whether the balance sheet of the Institution is fair and contains all the required particulars?
- Whether it is prepared properly and presents a true picture of the state of affairs of the Institution?
- In case the auditors received the information or explanation from the directors or employees of the Institution, they must mention the fact that whether he gave such information and whether it was acceptable.
- The Institution has to submit the following to the Central Government and the Reserve Bank of India:
- Copy of balance sheet and accounts;
- Copy of the report of the auditor;
- Report concerning the working of the Institution during the relevant year.
- The above-mentioned documents need to be submitted within four months of the date from which the accounts of the Institution were closed and balanced.
- The Central Government has to present all these documents before the Parliament.
- Thus, the NBFID is not under the vigilance of the Comptroller and Auditor General (CAG), Central Vigilance Commission (CVC), and Central Bureau of Investigation (CBI).
Establishment of other development financial institutions
Section 29 of the Act lays down the procedure regarding the establishment of other development financial institutions other than the NBFID. The procedure is as follows:
- The person who wants to establish other development financial institutions has to submit an application to the Reserve Bank of India.
- The license can be issued by the Reserve Bank of India after consulting with the Central Government provided all the terms and conditions are adhered to, that are laid down by the guidelines issued by the Reserve Bank of India.
- The institution that got a license as per Section 29(2) is to be governed according to the provisions of the Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949.
- Only that provisions of the Reserve Bank can be made applicable to the institutions established under this Section that are not contradictory to the provisions of this Act.
Power to make rules and regulations related to the Act
Powers of the Central Government to make rules
Section 30 deals with the powers of the Central Government to make rules to carry out the provisions of the Act. The rules can be framed by passing a notification.
The Central Government has the power to make rules for the following cases provided these do not go against the general powers issued by the Act:
- Institutions holding the shares of the NBFID under sub-section (3) of Section 5.
- The manner of election of directors by shareholders under clause (e) of sub-section (1) of Section 6;
- The terms and conditions regarding induction of independent directors to the Board as per sub-section (5) of Section 6;
- The fees and reimbursements in respect of independent directors under sub-section (3), and the term of office and other terms and conditions of service of the Chairperson, Managing Director, Deputy Managing Directors and other directors of Board under sub-section (5), of Section 9;
- The manner in which the members of Board and committees will disclose their interest under sub-section (1) of Section 16;
- The threshold for determination of beneficial interest by directors of the Institution or any relative of such director under the Explanation to sub-section (3) of Section 18;
- Conditions that need to be adhered to by the Institution while entering into a contract or an arrangement under sub-section (1) of Section 19;
- The parameters that will act as the basis for the external agency to review the performance of the Institution under sub-section (2) of Section 20;
- The rate of fees for Government under Section 22;
- The form and manner according to which the balance sheet and accounts of the Institution can be prepared under sub-section (1) of Section 25;
- And any other rule that needs to be prescribed.
Power of the Board to frame regulations
The power of the Board to make regulations is elucidated in Section 32 of the Act. The Board can exercise this power after prior sanction of the Central Government is given after consulting the Reserve Bank of India. The Board can make regulations only in the cases when such regulation is necessary to carry out the provision. Such regulation should not go against the basic powers of the Act.
The power to the Board has been given in the following cases:
- The salaries and allowances that are to be paid to the Managing Director and Deputy Managing Directors under sub-section (4) of Section 9;
- The time, place, and rules of procedure related to the transaction of business of the Board under sub-section (1) of Section 13;
- The time, place, and rules of procedure in regard to the transaction of business of the committees and their functions under sub-section (5) of Section 15;
- The amount for transactions under the proviso to sub-section (1) of Section 19;
- The terms and other conditions of service of the officers and employees of the Institution under sub-section (2) and the terms and conditions of deputation under sub-section (4) of Section 30;
- The mechanism under sub-section (1) of Section 39 to determine the penalties specified under sub-section (5) of Section 16 and sub-section (5) of Section 19.
Rules and regulations to be laid before the Parliament
- Every rule or regulation that is made as per this Act is to be presented before both the Houses of the Parliament.
- Such rule or regulation is to be tabled for thirty days before the Parliament. The period can either be completed during one session or two successive sessions.
- The rules and regulations will come into force depending on the decision of both the Houses. If both the Houses agree, then it can be enacted and the provision can be modified accordingly and if both the Houses disagree regarding the rule, then such rule is discarded.
- The only condition adhered to by the Houses is that the decision regarding acceptance or rejection should not be against the validity of any rule or regulation that was made in the past.
Indemnity of the directors
Section 40 deals with provisions regarding indemnity of the directors that are as follows:
- Every director is indemnified against the losses incurred if the duties are performed as per the Act. The benefit will not be given if such loss is the outcome of the default of the director only.
- The director is also indemnified in the following cases:
- When loss or expense is incurred by the Institution because of the fault of other directors or employees of the Institution; or
- When loss is incurred due to insufficiency or deficiency of the value of, or title to any property or security that was taken on the behalf of the Institution; or
- When the loss is the result of the wrongful act of any debtor or any other person that owed duty towards the Institution; or
- When the director acted in good faith while discharging his duties as prescribed by the Act.
Performance review of the Institution
Section 20 of the Act enumerates the provision regarding the performance review of the Institution. The provision is as follows:
- The performance of the Institution shall be reviewed by the external agency that will be appointed by the Central Government.
- The review will be done once every five years.
- The review will be done with respect to the purpose and objectives of the Institution as laid down in Section 4 and also take other parameters under consideration that may be prescribed.
- The external agency has to submit its report regarding review to the Board of Directors.
- The Board has to submit a copy of the and of the action (if any taken based on the report) to the Central Government. The period prescribed for this purpose is three months from the date of receipt of the report.
Questioning the validity of advance or loan
According to Section 37 of the Act, the validity of advance or loan cannot be questioned in the following cases:
- If all the provisions of this Act are met while granting a loan or advance, then the validity of such loan cannot be challenged for non-complying the provisions of the other law that is in force for time-being or any other resolution or instrument that were contrary to the provisions of this Act.
- However, this Section does not empower any company to obtain a loan or advance that is not allowed as per its charter documents.
- According to Section 35 of the Act, if any action against any employee is to be taken then the prior sanction of the Central Government is necessary.
- According to Section 45, the NBFID Act, 2021 will have an overriding effect. When other laws in force at that time have contradicting provisions still, the provisions of the NBFID Act will prevail.
- The provisions of the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949 will be amended as per the manner prescribed in the Second Schedule and Third Schedule of the Act respectively.
- According to Section 43 of the Act, the Institution will liquidate as per the directions and order of the Central Government. The laws governing the companies in case of winding up will not apply to the Institution.
The infrastructure sector plays a crucial role in the development of a country. Infrastructure paves the way for new opportunities and growth prospects for the country. In India, various aspects of the infrastructure sector are untapped and they need to be put into use to ensure development of the country and the NBFID will aid in attracting investments and help in financing the infrastructure projects. The infrastructure projects will also help in creating employment opportunities for the people in the country. The Act will not only establish the NBFID but also has provisions to set up similar institutions working for the same goal. Thus, the NBFID Act will prove to be the catalyst for the ecosystem of infrastructure funding and helping in the sustained growth of India in the coming future.
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