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DAILY NEWS ANALYSIS

27 Mar, 2021

31 Min Read

National Bank for Financing Infrastructure and Development Bill, 2021

GS-III : Economic Issues Infrastructure

National Bank for Financing Infrastructure and Development Bill, 2021

Introduction

  • The Bill seeks to establish the National Bank for Financing Infrastructure and Development (NBFID) as the principal Development Financial Institution (DFIs) for infrastructure financing.
  • It was announced in the Budget 2021.

About NBFID:

  • NBFID will be set up as a corporate body with authorised share capital of one lakh crore rupees.

Objectives of NBFID:

  • To directly or indirectly lend, invest, or attract investments for infrastructure projects located entirely or partly in India.
  • Includes facilitating the development of the market for bonds, loans, and derivatives for infrastructure financing.

Functions of NBFID:

  • Extending loans and advances for infrastructure projects.
  • Taking over or refinancing such existing loans.
  • Attracting investment from private sector investors and institutional investors for infrastructure projects.
  • Organising and facilitating foreign participation in infrastructure projects.
  • Facilitating negotiations with various government authorities for dispute resolution in the field of infrastructure financing.
  • Providing consultancy services in infrastructure financing.

Funds for NBFID:

  • It may raise money in the form of loans or otherwise both in Indian rupees and foreign currencies, or secure money by the issue and sale of various financial instruments including bonds and debentures.
  • It may borrow money from the central government, Reserve Bank of India (RBI), scheduled commercial banks, mutual funds, and multilateral institutions such as the World Bank and Asian Development Bank.
  • Initially, the central government will own 100% shares of the institution which may subsequently be reduced up to 26%.

Management structure of NBFID:

  • NBFID will be governed by a Board of Directors.
    • The Chairperson will be appointed by the central government in consultation with RBI.
  • 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.

Role of Central Government:

  • The central government will provide grants worth Rs. 5,000 crore to NBFID by the end of the first financial year.
  • The government will also provide guarantee at a concessional rate of up to 0.1% for borrowing from multilateral institutions, sovereign wealth funds, and other foreign funds.
  • Costs towards insulation from fluctuations in foreign exchange (in connection with borrowing in foreign currency) may be reimbursed by the government in part or full.
  • Upon request by NBFID, the government may guarantee the bonds, debentures, and loans issued by NBFID.

Investigation And Prosecution:

  • No investigation can be initiated against employees of NBFID without the prior sanction of the central government in case of the chairperson or other directors, and the managing director in case of other employees.
  • Courts will also require prior sanction for taking cognisance of offences in matters involving employees of NBFID.

Other Provisions

  • 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.

Source: TH

Minerals (Development and Regulation) Amendment Bill, 2021

GS-III : Economic Issues Mine and minerals

Minerals (Development and Regulation) Amendment Bill, 2021

  • This bill was introduced to streamline the renewal of the auction process for minerals and coal mining rights.

What are the key changes?

  • The amendment proposes to allow captive miners of both coal and other minerals to sell up to 50 per cent of their production after meeting the requirements of the end-use plant and on paying additional royalty to the state government.
    • Operators are currently only allowed to use coal and minerals extracted from captive mines for their own industrial use.
    • Experts note that this increased flexibility would allow miners to maximise output from captive mines as they would be able to sell output in excess of their own requirements.
  • The amendment also proposes to fix additional royalty payments to states for the extension of mining leases for central public sector enterprises.
    • Disagreements over the additional royalty to be paid by state-owned NMDC to the Karnataka government for the extension of mining rights at the Donimalai mine had led to NMDC suspending operations at the mine for over two years.
    • NMDC recently resumed operations after an interim agreement on the additional royalty to be paid to the Karnataka government.
  • Experts noted that state governments may object to the fixing of an additional royalty to be paid by CPSEs for such extensions as this may lead to lower revenues compared to a transparent auction process.
  • Another key change the Bill proposes is to empower the central government to conduct auctions or re-auction processes for the grant of a mining lease if a state government fails to complete the auction process in a specified period, decided after consultations between the Centre and state.
  • Experts noted that industry players may welcome the move as it would likely lead to greater transparency in the auction process as there is a perception that state governments may in some cases prefer some bidders, and try to delay or cancel mining rights if their preferred bidders do not win mining rights.

Could the amendment face legal challenges?

  • Experts said the amendment, if passed, was likely to face legal challenges particularly from state governments where the BJP and its allies are not in power.
  • “If an act is passed in which any state government’s discretionary power is taken away or their rights or benefits are infringed.

Source: IE

The Insurance (Amendment) Bill, 2021

GS-III : Economic Issues FDI REFORMS

The Insurance (Amendment) Bill, 2021

Introduction

  • The Bill amends the Insurance Act, 1938.
  • The Act provides the framework for functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, its shareholders, and the regulator (the Insurance Regulatory and Development Authority of India).
  • The Bill seeks to increase the maximum foreign investment allowed in an Indian insurance company.

Features of the Bill:

Foreign investment:

  • The Act allows foreign investors to hold up to 49% of the capital in an Indian insurance company, which must be owned and controlled by an Indian entity.
  • The Bill increases the limit on foreign investment in an Indian insurance company from 49% to 74%, and removes restrictions on ownership and control.
  • However, such foreign investment may be subject to additional conditions as prescribed by the central government.

Investment of assets:

  • The Act requires insurers to hold a minimum investment in assets which would be sufficient to clear their insurance claim liabilities.
  • If the insurer is incorporated or domiciled outside India, such assets must be held in India in a trust and vested with trustees who must be residents of India.
  • The Act specifies in an explanation that this will also apply to an insurer incorporated in India, in which at least:
    • (i) 33% capital is owned by investors domiciled outside India, or
    • (ii) 33% of the members of the governing body are domiciled outside India.
  • The Bill removes this explanation.

Source: TH/PRS

International Intellectual Property Index 2021 Released

GS-II : Important reports Important reports

The International Intellectual Property Index 2021 has been released.

About International Intellectual Property Index:

  • It is an annual report released by the US Chamber of Commerce & Global Innovation Policy Centre(GIPC).
  • The index evaluates Intellectual Property rights in 53 global economies. These economies represent together over 90% of global GDP.
  • It ranks countries based on 50 unique indicators. These indicators are divided across nine categories of protection:
    • 1) Patents
    • 2) copyrights
    • 3) trademarks
    • 4) design rights
    • 5) trade secrets
    • 6) commercialization of IP assets
    • 7) enforcement
    • 8) systemic efficiency and
    • 9) membership and ratification of international treaties.

Key Findings Related to India:

  • India has been ranked 40th in the 2021 index among the 53 global economies. In 2020 also, India was ranked 40th.
  • Among BRICS nations, India registered the second-highest growth with an overall improvement of over 13%,

Other Key Findings Globally:

  • Despite the challenges presented by COVID-19, the global IP environment continued to strengthen. In the 2021 report, 32 of the 53 economies had positive improvements in their scores.
  • The US, the UK, Germany, France, and Japan are the top five economies on the IP Index in 2021.

Source: TH

Traffic Suspension in Suez Canal

GS-II : International Relations Religion and diplomacy

A 400 m long “Ever Given vessel” blocked the Suez Canal. The ship blocked the canal due to a lack of visibility created by bad weather and a sand storm. So temporarily the traffic is suspended.

About the Suez Canal:

  • Suez Canal is a sea-level waterway running north-south across the Isthmus of Suez in Egypt to connect the Mediterranean and the Red seas. The canal separates the African continent from Asia.

Significance:

  • Suez Canal is actually the first canal that directly links the Mediterranean Sea to the Red Sea.
  • The Suez Canal is also important because it is the shortest maritime route from Europe to Asia.
  • An alternative route to the Suez Canal is through the Cape of Good Hope on the southern tip of Africa. But this route takes two weeks longer than the Suez Canal Route.
  • The United Kingdom and France owned the canal until 1956 when the President of Egypt nationalized it. Since then, the canal is operated and maintained by the Suez Canal Authority(SCA).
  • Suez Canal is one of the world’s busiest and important trade route. About 12% of global trade passes through it.

Source: TH

PM thanked United Nations Institute for Training and Research

GS-II : International organisation Major International Organizations

United Nations Institute for Training and Research (UNITAR) appreciated India’s progress in reducing premature mortality from non-communicable diseases (NCDs). The Indian Prime Minister(PM) has thanked the UNITAR in return.

About United Nations Institute for Training and Research(UNITAR)

  • United Nations Institute for Training and Research(UNITAR) is a dedicated training arm of the United Nations system. It was founded in 1963.
  • UNITAR provides training and learning services to individuals, organizations and institutions.
  • The services of UNITAR aims to enhance global decision-making and support country-level action for shaping a better future.
  • UNITAR is operated as an autonomous body within the United Nations system.
  • It is headed by an Executive Director and governed by a Board of Trustees. They are appointed by the United Nations Secretary-General.
  • UNITAR does not receive any funds from the United Nations budget. The institute is financed entirely from voluntary contributions. It receives contributions mainly from the UN Member States, other UN agencies, Intergovernmental organization, NGOs and the private sector.
  • Headquarters: Geneva, Switzerland.

About United Nations University(UNU):

  • United Nations University(UNU) is the academic and research arm of the United Nations established in 1972.
  • Its mission is to help resolve global issues related to human development and welfare through collaborative research and education.
  • Since 2010, UNU has been authorized by the UNGA to grant degrees, offering several masters and doctoral programs.
  • Headquarters: Tokyo, Japan.

Source: TH

National Bank for Financing Infrastructure and Development Bill, 2021

GS-II : Important Bills Important Bills

Rajya Sabha has recently cleared National Bank for Financing Infrastructure and Development Bill, 2021

About National Bank for Financing Infrastructure and Development (NBFID) Bill, 2021 :

  • The Bill seeks to establish the NBFID as the principal development financial institution(DFIs) for infrastructure financing.
  • DFIs are set up for providing long-term finance for segments involving risk beyond the acceptable limits of commercial banks and other ordinary financial institutions.

Structure of the NBFID:

  • NBFID will be a corporate body with authorised share capital of Rs. 1 lakh crores.
  • Initially, the central government will own 100% shares of the institution. This share may subsequently be reduced up to 26%.

Objectives:

  • To directly or indirectly lend, invest, or attract investments for infrastructure projects located entirely or partly in India.
  • Includes facilitating the development of the market for bonds, loans, and derivatives for infrastructure financing.

Functions:

  • NBFID will work toward financial as well as developmental objectives.
  • Financial Functions include:
    • Extending loans and advances for infrastructure projects.
    • Taking over or refinancing such existing loans.
    • Attracting investment from private sector investors and institutional investors for infrastructure projects.
    • Organising and facilitating foreign participation in infrastructure projects.
    • Facilitating negotiations with various government authorities for dispute resolution in the field of infrastructure financing.
    • Providing consultancy services in infrastructure financing.

Developmental functions include:

  • Facilitating the development of the market for bonds, loans, and derivatives for infrastructure financing

Management of NBFID:

  • NBFID will be governed by a Board of Directors. The Chairperson will be appointed by the central government in consultation with RBI.

Source of funds:

  • NBFID may raise money in the form of loans or otherwise both in Indian rupees and foreign currencies. It may also raise finances by the issue and sale of various financial instruments including bonds and debentures.
  • NBFID may also borrow money from:
    • (i) central government,
    • (ii) Reserve Bank of India (RBI),
    • (iii) scheduled commercial banks,
    • (iv) mutual funds, and
    • (v) multilateral institutions such as the World Bank and Asian Development Bank.

Support from the central government:

  • The central government will provide grants worth Rs 5,000 crore to NBFID by the end of the first financial year.
  • The government will also provide a guarantee at a concessional rate of up to 0.1%.
  • This facility will be available for borrowing from multilateral institutions, sovereign wealth funds, and other foreign funds.

Prior sanction for investigation and prosecution:

  • No investigation can be initiated against employees of the NBFID without the prior sanction of:
    • the central government in case of the chairperson or other directors, and
    • managing director in case of other employees.
  • Courts will also require prior sanction for taking cognizance of offences in matters involving employees of NBFID.

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.

Source: TH

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