RBI Deputy Governor Calls for Independent Business Model at NaBFID

RBI Deputy Governor M Rajeshwar Rao urged the National Bank for Financing Infrastructure and Development (NaBFID) to create a business model that does not rely on government support. Speaking at a NaBFID event, he emphasised the need for a self-sustainable model to evolve over the medium term, free from regulatory dispensations.

Focus on Private Sector Investment

Rao highlighted the importance of increased private sector involvement in infrastructure investments. He noted that while the government has historically played a significant role, NaBFID can act as a catalyst to attract private sector investments. "NaBFID can play a transformative role as a catalyst to get the private sector investments," he said.

He also mentioned that the central bank has received feedback on project lending proposals and will soon release final norms. When asked about credit enhancements by NaBFID, Rao stated that the RBI would consider such requests as they arise.

Strengthening Institutional Capabilities

Rao stressed the importance of equipping NaBFID with essential resources, skills, and knowledge. He called for concerted efforts in human capital development, institutional strengthening, and adopting best practices. "As NaBFID is still in its formative phase, the focus must be on equipping itself with the necessary resources, skills and knowledge through concerted efforts on human capital development, institutional strengthening, and adoption of best practices," he said.

He also advised NaBFID to enhance its risk management capabilities and establish robust assurance systems from the beginning. This would help foster a sound risk culture moving forward. "NaBFID must particularly look to strengthening the risk management and establishment of robust assurance systems from the outset, fostering a sound risk culture going forward," Rao added.

Developing Project Appraisal Expertise

Rao pointed out that NaBFID needs to quickly develop expertise in project appraisal. Establishing itself as a leader in project selection, appraisal, and monitoring will provide comfort to lenders and stakeholders. "The entity also needs to quickly develop project appraisal expertise and establish itself as a leader, setting benchmarks in the market for its project selection, appraisal and monitoring to give comfort to lenders and stakeholders," he noted.

He also mentioned that agile strategies are necessary for institutions focusing on government-prioritised sectors due to the dynamic nature of current times. "The dynamic nature of our times necessitates agile strategies for institutions with a focus on sectors prioritised by the government," he added.

The call for NaBFID to develop a sustainable business model highlights the need for independence from continuous government support. This approach aims to ensure long-term viability and resilience in infrastructure financing.