National Bank likely to be part of Budget 2021 & may have authorised sum of Rs 1 lakh crore

An important development has come into notice as sources claim that Finance Minister Nirmala Sitharaman may announce a National Bank as a part of Union Budget 2021 on February 1, Moneycontrol reported.

A bill with the name – the National Bank for Financing Infrastructure and Development Bill, 2020 has reportedly been drafted by the Ministry of Finance to make the process of obtaining low-cost funds for big infrastructure projects.

The proposed bank may have an authorised sum of Rs 1 lakh crore, apart from an initial paid-up capital of Rs 20 thousand crore.

The new bank may be incorporated by enacting a new law in the Parliament.

Some features of this bank will be:

  • This bank is expected take the place of India Infrastructure Finance Company Limited (llFCL) and the government may make it mandatory for Provident Fund, Pension and Insurance Funds to put a certain amount in the proposed bank.
  • Direct access to the bank line from the Reserve Bank of India (RBI) may also be allowed. Some amendments in the RBI Act and the Banking Regulation Act may be proposed.
  • The bank will be launched using a tax-free fund to touch the required capital limit.
  • As compared to NBFCs, the capital adequacy requirements will be set lower, and the borrowing limits will be higher.
  • The primary motive of the bank is to support the project of National Infrastructure Pipeline.
  • Some of its main functions will be like providing an easier and long-term method financing. Also, the bank will be involved in the monetization of the project and regular monitoring for a timely meeting of the deadlines.
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