”GS Paper – 3 : Infrastructure, Banking Sector & NBFCs”
Introduction:
Objective:
Difference between Banks and DFIs:
A Corporate Body:
(i) central government
(ii) multilateral institutions
(iii) sovereign wealth funds
(iv) pension funds
(v) insurers
(vi) financial institutions
(vii) banks, and
(viii) any other institution prescribed by the central government.
Note: Initially, the central government will own 100% shares of the institution which may subsequently be reduced up to 26%.
Functions of NBFID:
(i) extending loans and advances for infrastructure projects
(ii) taking over or refinancing such existing loans
(iii) attracting investment from private sector investors and institutional investors for infrastructure projects
(iv) organising and facilitating foreign participation in infrastructure projects
(v) facilitating negotiations with various government authorities for dispute resolution in the field of infrastructure financing, and
(vi) providing consultancy services in infrastructure financing.
Source of funds:
(i) central government
(ii) Reserve Bank of India (RBI)
(iii) scheduled commercial banks
(iii) mutual funds, and
(iv) multilateral institutions such as World Bank and Asian Development Bank.
Management of NBFID:
(i) the Chairperson appointed by the central government in consultation with RBI,
(ii) a Managing Director,
(iii) up to three Deputy Managing Directors,
(iv) two directors nominated by the central government,
(v) up to three directors elected by shareholders, and
(vi) a few independent directors (as specified).
Note: A body constituted by the central government will recommend candidates for the post of the Managing Director and Deputy Managing Directors. The Board will appoint independent directors based on the recommendation of an internal committee.
Support from the central government:
The prior sanction for investigation and prosecution:
(i) the central government in case of the chairperson or other directors, and
(ii) the managing director in the case of other employees.
Note: Courts will also require prior sanction for taking cognisance of offences in matters involving employees of NBFID.
Provision for Other DFIs:
The Bill also provides for any person to set up a DFI by applying to RBI. RBI may grant a licence for DFI in consultation with the central government. RBI will also prescribe regulations for these DFIs.
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