DFI core team will come from other financial institutions

India’s new development finance institution (DFI) is being set up on the model of the China-based New Development Bank, in which senior staff from the biggest institutions have been seconded, a person familiar with the matter said. .

The National Bank for Financing Infrastructure and Development (NABFID) will spearhead the financing of infrastructure projects, the Union budget for FY22 said.

The government decided to set up NABFID as lenders were not too keen on taking large exposures to infrastructure projects after burning their fingers in the last round of financing. The long gestation period of infrastructure projects typically leads to asset-liability mismatches, as liabilities, or lender resources, average around one year.

The NABFID team includes veterans with experience in project finance from ICICI Bank and State Bank of India, among others. The DFI will soon have a managing director, who will be hired on the market to manage its operations, the person quoted above said, speaking on condition of anonymity.

“When the New Development Bank (formerly BRICS Development Bank) was established, the BRICS countries sent senior officials on secondment to build it from scratch. The reason for this is that the new institutions cannot afford the salaries up front and rely on the parents of the employees to bear the cost.” As the IFD begins full-time operations, it will accommodate more people, he added.

While India’s largest lender, SBI, has extensive experience in financing infrastructure projects, private lender ICICI Bank began operations as a DFI to finance long-term projects, before transforming into commercial bank.

The government is also in the process of appointing three independent directors to the board of NABFID, the PTI news agency reported on February 13. In October, the government appointed KV Kamath, a banking veteran and former head of ICICI bank, as chairman of the DFI. On March 15, Kamath said the bank would finance private and public sector entities. “The governance structure and the structure of the board of directors are in place. Board expansion is expected to take place as we speak. We have a core team of about 25 people seconded from various banks,” Kamath said at the Indian Construction Equipment Manufacturers Association annual conclave.

The selection of the managing director and other senior executives to run the bank is underway, he added. “We have no constraints in terms of the type of loans we could make. We have no constraints as to the type of innovative instruments that we could put in place. It’s in the charter that we could do a wide variety of things and take the appropriate path,” Kamath said.

On March 9, the Reserve Bank of India said that NABFID had been established as a DFI to support the development of long-term infrastructure projects in India, and that the regulator would oversee it as a financial institution for all India, the fifth after Export-Import. Bank of India, National Bank for Agriculture and Rural Development, National Housing Bank and Small Industries Development Bank of India.

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Marianne R. Winn