NaBFID should become self-sustainable, not rely on govt: RBI dy governor
Source: Business Standard
He further noted that the underdeveloped financial system and the limited market for infrastructure debt have made the sector heavily dependent on banks | File image
The National Bank for Financing Infrastructure and Development (NaBFID) should aim to become a self-sustaining business that does not depend on “continuous government support”, said M Rajeshwar Rao, deputy governor of the Reserve Bank of India, on Thursday.
NaBFID is a development finance institution that was set up in 2021 to focus on infrastructure funding. “NaBFID over the medium term, should plan for self-sustainable operations under a business model that is not reliant on continuous government support,” said Rao.
An underdeveloped financial system and limited market for infrastructure debt have made the sector reliant on banks and non-banking financial companies for financing. When the non-performing assets of banks increased over the past decade and a major NBFC defaulted on loans, “appetite of such financial intermediaries” for infrastructure investments reduced.
Rao said that high costs and long gestation periods complicate infrastructure financing and lead to asset-liability mismatches. Delays in approvals, clearances, land acquisition challenges and breaches of agreements exacerbate the risks and often result in cost overruns.
He said that the interdependence of infrastructure projects adds another layer of complexity. The success of one project often hinges on the availability of complementary infrastructure. This interconnectedness means that delays or issues in one project can affect others, making the financing process more intricate. Effective infrastructure development requires a holistic approach where projects are viewed as part of an interconnected network rather than in isolation. Successful outcomes depend on synchronized financial planning, meticulous execution, and leveraging synergies across projects.
First Published: Sep 12 2024 | 11:30 AM IST
