Home / Industry / Banking /  DFI core team to come from other financial institutions

India’s new development finance institution (DFI) is being set up along the lines of the New Development Bank based in China, wherein senior executives from top institutions were on secondment, a person aware of the matter said.

The National Bank for Financing Infrastructure and Development (NABFID) will spearhead financing of infrastructure projects, the Union budget for FY22 had 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, considering that the liabilities, or resources of lenders, averages about a year.

The NABFID team comprises veterans with experience in project financing from ICICI Bank and State Bank of India, among others. The DFI will soon have a managing director, who will be hired from the market to manage its operations, said the person cited above, seeking anonymity.

“When New Development Bank (formerly BRICS Development Bank) was set up, Brics nations sent senior officials on secondment to build it from scratch. The reason is new institutions cannot afford to pay salaries initially and rely on the employees’ parents to bear the cost." As the DFI starts full-time operations, it will take in more people, he added.

While India’s largest lender SBI has extensive experience in financing infra projects, private lender ICICI Bank had started operation as a DFI to fund long-term projects, before transforming into a commercial bank.

The government is also in the process of appointing three independent directors on the NABFID board, news agency PTI reported on 13 February. In October, the government appointed banking industry veteran and former ICICI Bank chief K.V. Kamath as the chairperson of the DFI. On 15 March, Kamath said the bank will fund both private and public sector entities. “The governance structure and the board structure are in place. The board expansion should happen as we speak. We have a core team of about 25 people seconded by various banks," Kamath said at the annual conclave of the Indian Construction Equipment Manufacturers Association.

The selection of the chief executive and other senior executives to run the bank is under way, he added. “We have no constraints in terms of the type of loans we could do. We have no constraints in terms of what type of innovative instruments we could do. It is in the charter that we could do a wide variety of things and take the path as appropriate," Kamath said.

On 9 March, the Reserve Bank of India said NABFID was set up as a DFI to support the development of long-term infra projects in India, and the regulator will supervise it as an all-India financial institution—the fifth after Export-Import Bank of India, National Bank for Agriculture and Rural Development, the National Housing Bank, and Small Industries Development Bank of India.


Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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