The National Bank for Financing Infrastructure and Development (NaBFID) is a statutory Development Finance Institution (DFI) established by an Act of Parliament, the National Bank for Financing Infrastructure and Development Act, 2021. It was created to address the structural gap in India's infrastructure financing, which arose because commercial banks face an asset-liability mismatch when funding long-gestation projects with their short-term deposits. The need for a dedicated DFI was announced in the Union Budget 2021-22, and NaBFID was officially incorporated in November 2021.
NaBFID's core mechanism involves both financial and developmental objectives. Its financial objective is to directly or indirectly lend, invest, or attract investments for infrastructure projects, while its developmental objective is to facilitate the growth of the market for bonds, loans, and derivatives for infrastructure financing. Key functions include providing long-term loans, refinancing existing loans, offering Credit Enhancement to improve project credit ratings, and providing Take-out Financing to assume a project loan from a commercial bank after the construction phase. This mechanism helps commercial banks avoid the risk of long-term exposure.
NaBFID is regulated and supervised by the Reserve Bank of India (RBI) as an All-India Financial Institution (AIFI) under Sections 45L and 45N of the RBI Act, 1934. It is the fifth AIFI, alongside institutions like the Export-Import Bank of India (EXIM Bank) and the National Bank for Agriculture and Rural Development (NABARD). Initially, the Central Government holds 100% of its shares, with a provision to reduce its stake to a minimum of 26% over time. A recent development is the government's plan to rename NaBFID to Infrastructure Development Bank (IDB) to reposition it as a global financial institution.