In Budget 2021, Expect A New Nationalised Bank, To Exclusively Fund, Monitor Infrastructure Development

As we already know, budget 2021-22 will lay special emphasis on Infrastructure building, along with some increased health expenditure, as Finance Minister Nirmala Sitharaman has said on several occasions.

In the budget 2021-22, the government will increase expenditure on infrastructure to recover the economy and generate more employment.

To make capital readily available for large infrastructure spending, Minister Sitharaman may well announce a special nationalised bank to finance infrastructure, which is likely to be constituted though a new bill, The National Bank Financing Infrastructure and Development Bill 2020, Money Control reported.

That bank will have an authorised capital of Rs 100,000 crores, with an initial paid-up capital of Rs. 20,000 crore, along with a possible direct line of credit access to RBI, and the necessary changes in RBI Act may also be proposed during the budget session.

The government will put in place higher borrowing limits and lower capital adequacy requirements, and the bank will be financed trough tax-free funds.

This bank may displace IIFCL (India Infrastructure Finance Company Ltd. (IIFCL), and the government may direct Provident Fund (PF), LIC and Pension Funds to save money in the new bank.

The main purpose of the bank will be to finance National Infrastructure Pipeline (NIP), which is a mega investment worth Rs. 111 lakh crore, and it will play a main role in facilitating easy and long-term loans to infrastructure projects.

The bank will also handle restructuring infra projects, monetisation of projects and monitoring old project schedules and timely completion of projects.

This will be a major step towards infrastructure financing in India, as infrastructure financing faces capital crunches regularly.