The Rajya Sabha on Thursday cleared the legislation to establish the National Bank for Financing Infrastructure and Development (NBFID), which was announced in the Budget speech by Finance Minister Nirmala Sitharaman as the principal development financial institution (DFIs) for infrastructure financing.
Opposition members argued unsuccessfully for sending the Bill to a select committee, saying that in its present form there was no scope for “external oversight or surveillance”. Ms. Sitharaman, however, said all safeguards had been provided for and an audited report would be placed in Parliament every year.
“Tried and rejected”
Senior Congress leader Jairam Ramesh opened the debate, saying the concept of DFIs had already been tried, tested and rejected. The first such institution was set up in 1948. In 1991, Manmohan Singh, as Finance Minister, had set up the Narsimham committee, which came to the conclusion that the era of DFIs was over. “Thirty years after Dr. Manmohan Singh’s Budget, the clock has turned back and we are going back to the DFI era,” Mr. Ramesh said. He asked the Finance Minister to explain what prompted this reversal of path.
He said that despite the government having 26 per cent stake in this bank, the Bill did not provide for an oversight mechanism. “The Act empowers the government to extend sovereign guarantee in case of a default. No external oversight, no surveillance, no CAG, no monitoring, but the government will extend sovereign guarantee. Sir, I fail to understand the logic behind this. Today, it is your government, tomorrow it could be any other government. You are creating an Act in perpetuity,” he said.
He also criticised the government for not sending this Bill to a Parliamentary committee. The other lacunae in the act was the protection provided to management for the decisions it takes as an “act of good faith”. “What is an act of good faith? Who will determine an act of good faith? What criteria will be used? One person’s good faith is another person’s malicious intent,” Mr. Ramesh said.
RJD MP Manoj K. Jha expressed dismay that the government, while only holding 26 per cent stake, was open to giving away 74 per cent stake. “How many countries in the world actually allow private capital with this quantum of controlling stake? That is a point of worry. I hope you take my worry away,” he said.
Ms Sitharaman said the NBFID was the need of the hour and the need of the next 25 years in India’s developmental story. The infrastructure that it planned to fund was not only roads, but also social infrastructure like schools and hospitals. It would be a professionally-run body, with only the government appointing the Chairperson.
The Bill, she said, had safeguards, including the provision that the NBFID had to furnish to the Central government and the Reserve Bank a copy of its balance-sheet and accounts, together with a copy of the auditor’s report and a report of the working of the Institution during the relevant year, within four months from the date on which its accounts were closed and balanced. And these reports would be tabled in both Houses of Parliament every year.
“Parliament’s oversight annually is envisaged and built into the Act itself,” she said.