Regulations on National Bank for Financing Infrastructure
National Bank for Financing Infrastructure and Development General Regulations, 2022.
F. No. 02/ NaBFID/2021-22. —In exercise of the powers conferred by section 32 of the National Bank for Financing Infrastructure and Development Act, 2021 (17 of 2021), the Board with the previous approval of the Central Government and in consultation with the Reserve Bank, hereby makes the following regulations, namely:—
- Short title and commencement.—
(1) These regulations may be called the National Bank for Financing Infrastructure and Development General Regulations, 2022.
(2) They shall come into force on the date of their publication in the Official Gazette. - Definitions.—
(1) In these regulations, unless the content otherwise requires,—
(a) “Act” means the National Bank for Financing Infrastructure and Development Act, 2021 (17 of 2021);
(b) “section” means a section of the Act.
(2) Words and expressions used herein and not defined in these regulations, but defined in the Act or the rules framed thereunder shall have the meanings respectively assigned to them in the Act or the rules. - Manner of holding meetings of Board and committees.—
(1) The Chairperson and in his absence, the Managing Director and in the absence of both, the senior-most Deputy Managing Director, shall fix the date, time and place of meetings of the Board and approve the items of agenda therefor.
(2) Such director on a committee as the Board may appoint as the chairperson of the committee shall chair the meetings, fix the date, time and place of such meetings, approve the items of agenda therefor:
Provided that in the absence of the chairperson, any director elected by the members present at the meeting from amongst themselves shall chair the meeting.
(3) Notice for meetings of the Board and committees shall be issued by the Company Secretary or, if there is no Company Secretary, by any director or other employee constituting the senior management of the Institution as may be specified by the Board in this behalf.
(4) The Institution shall, in respect of the Board and committees, observe such secretarial standards as are applicable in respect of Board meetings of a company under sub-section (10) of section 118 of the Companies Act, 2013 (18 of 2013), save as otherwise provided for in the Act, rules and regulations made thereunder. - Audit Committee.—
(1) The Audit Committee shall perform the following functions, namely:—
(a) give recommendations to the Board for appointment of the auditors of the Institution in general meeting of the shareholders;
(b) give recommendations to the Board for appointment, remuneration and removal of internal auditors of the Institution;
(c) review and monitor the independence and performance of the auditors referred to in clause (a) and the effectiveness of the audit process;
(d) evaluate internal financial controls and risk management systems;
(e) scrutinise inter-corporate loans and investments;
(f) cause valuation of undertakings or assets of the Institution to be done, wherever it is necessary;
(g) assess whether proper systems have been devised to ensure compliance with the provisions of applicable laws and are operating effectively;
(h) formulate in consultation with the internal auditor, the scope, functioning, periodicity and methodology for conducting internal audit;
(i) review the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and report the matter to the Board;
(j) examine the quarterly, half-yearly and annual financial statements and the auditor’s report before submission to the Board:
Provided that the auditors and the key managerial personnel shall have a right to be heard in the meeting of the Audit Committee when it considers the auditor’s report, but shall not have the right to vote;
(k) recommend to the Board approval of the transactions of the Institution with related parties:
Provided that the Audit Committee may grant omnibus approval for related party transactions proposed to be entered into by the Institution subject to the conditions specified in sub-regulation (2);
(l) call for comments of the auditors about internal control systems, the scope of audit, including observations of the auditors and review of financial statement before their submission to the Board, and discuss any related issues with the internal and statutory auditors and the management of the Institution;
(m) make recommendations to the Board for appointment of the Chief Financial Officer;
(n) make recommendations to the Board for appointment, removal and remuneration of the head of the internal audit function;
(o) investigate any matter in relation to the functions specified in this regulation or that may be referred to it by the Board, for which the Audit Committee may obtain professional advice from external sources wherever it deems it necessary and shall have full access to information contained in the records of the Institution;
(p) discuss with auditors the nature and scope of audit and any area of concern identified after the audit;
(q) exercise such other powers and functions as the Board may specify.
Explanation.—For the purposes of these regulations, “Chief Financial Officer” shall mean an officer of the Institution who is appointed as such and is the head of its finance function.
(2) The Board may, by order, empower the Audit Committee to grant omnibus approval for related party transactions proposed to be entered into by the Institution, subject to the following conditions, namely:—
(a) the Audit Committee shall formulate the criteria for granting omnibus approval, including those transactions which are repetitive in nature;
(b) the Audit Committee shall satisfy itself that such approval is in the interest of the Institution;
(c) the omnibus approval shall specify the following conditions, namely:—
(i) the details regarding the name of the related party, the nature, period and maximum amount of the transactions that shall be entered into;
(ii) the details regarding indicative base price or current contracted price, along with the formula, if any, for variation in the price;
(iii) such other conditions as the Audit Committee may deem fit:
Provided that where the need for related party transaction cannot be foreseen and the said details are not available, the Audit Committee may grant omnibus approval for such transactions subject to their value not exceeding one crore rupees per transaction;
(d) the Audit Committee shall review on a quarterly basis, the details of related party transactions entered into by the Institution pursuant to every omnibus approval given;
(e) the omnibus approval shall be valid for a period not exceeding one year and shall require fresh approval after the expiry of one year.
- Nomination and Remuneration Committee.—The Nomination and Remuneration Committee shall perform the following functions, namely:—
(a) formulate the criteria for determining qualifications, positive attributes and independence of a director to be appointed under clause (f) of sub-section (1) of section 6, and recommend such criteria to the Board;
(b) identify individuals who are qualified to be appointed as a director in accordance with the criteria referred to in clause (a);
(c) give recommendations to the Board for appointment of such an individual as director;
(d) recommend to the Board, the sum payable as sitting fee and fixed remuneration, if any, for a director who is other than an officer of the Central Government or a whole-time director;
(e) recommend to the Board, the salary and allowances payable to the Managing Director, Deputy Managing Directors, officers and other employees, as specified in regulation 9;
(f) determine the terms and conditions of service of officers and other employees on deputation;
(g) serve as the authority to determine penalties as specified in regulation 11;
(h) exercise such other powers and functions as the Board may specify.
- Risk Management Committee.—The Risk Management Committee shall perform the following functions, namely:—
(a) formulate the risk management policy of the Institution which shall include the following, namely:—
(i) the framework for identification of internal and external risks faced by the Institution, including financial risk, operational risk, sectoral risk, sustainability risk, information risk and cybersecurity risk;
(ii) measures for risk mitigation, including systems and processes for internal control of identified risks;
(iii) business continuity plan;
(b) ensure that appropriate methodology, processes and systems are in place to monitor and evaluate risks associated with the business of the Institution;
(c) monitor and oversee implementation of the risk management policy including evaluating the adequacy of risk management systems;
(d) review the risk management policy of the Institution periodically, while considering changing industry dynamics and evolving complexity;
(e) keep the Board informed about the nature and content of its discussions, recommendations and actions to be taken;
(f) recommend to the Board the appointment, removal and remuneration of the head of the risk function of the Institution;
(g) coordinate its activities with other committees and where there is overlap in activities, in accordance with such framework as the Board may lay down for this purpose;
(h) exercise such other powers and functions as the Board may specify. - Executive Committee and other committees.—
(1) Subject to such general or special directions as the Board may give from time to time, the Executive Committee may deal with any matter within the competence of the Board.
(2) A committee constituted under sub-section (4) of section 15 may render advice to the Board on such matters as the Board may refer to it, either generally or specially and shall perform such duties as the Board may entrust to it. - Amount for transactions with related party.—
For the purposes of the first proviso to sub-section (1) of section 19, the Institution shall not enter into a transaction where the transaction to be entered into,—
(a) as contracts or arrangements relating to matters referred to in clauses (a) to (e) of sub-section (1) of section 19 involving—
(i) sale, purchase or supply of any goods or material, directly or through appointment of agent, amounting to ten per cent. or more of the turnover of the Institution;
(ii) selling or otherwise disposing of or buying property of any kind, directly or through appointment
of agent, amounting to ten per cent. or more of net worth of the Institution;
(iii) leasing of property any kind amounting to ten per cent. or more of the turnover of the Institution;
(iv) availing or rendering of any services, directly or through appointment of agent, amounting to ten per cent. or more of the turnover of the Institution;
(b) is for appointment to any office or place of profit in the Institution, its subsidiaries or associate companies at a monthly remuneration exceeding two and a half lakh rupees;
(c) is for remuneration for underwriting the subscription of any securities, or derivatives thereof, of the Institution exceeding one per cent. of the net worth.
Explanation.—For the purposes of this regulation,—
(a) the percentage referred to in sub-clauses (i) to (iv) of clause (a) shall be reckoned for the transaction to be entered into taken together with previous transactions during a financial year;
(b) turnover and net worth shall be computed on the basis of the audited financial statement of the preceding financial year;
(c) explanatory statement to be annexed to the notice of a general meeting of shareholders shall contain the following particulars, namely:—
(i) name of the related party;
(ii) name of the director or key managerial personnel who is related, if any;
(iii) nature of relationship;
(iv) nature, material terms, monetary value and particulars of the contract or arrangements;
(v) any other information relevant or important for the members to take a decision on the proposed resolution.
- Salary and allowances.—
(1) The Nomination and Remuneration Committee shall recommend to the Board, in respect of the Managing Director, Deputy Managing Directors, officers and other employees of the Institution, the
salary and allowances, having regard to the following, namely:—
(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate individuals of the quality required to run the Institution successfully;
(b) relationship of remuneration to performance is clear and meets appropriate performance benchmark;
(c) remuneration involves a balance between fixed and incentive pay reflecting short and long-term
performance objectives appropriate to the working of the Institution and its goals;
(d) professional qualifications and experience of the individual concerned;
(e) the remuneration or commission drawn by the individual concerned in any other capacity or from any other company;
(f) the financial position of the Institution, including its financial and operating performance during the three preceding financial years.
(2) While recommending the salary and allowances as specified in sub-regulation (1), the Nomination and Remuneration Committee shall ensure that the total managerial remuneration payable by the Institution to its directors in respect of a financial year does not exceed the higher of the aggregate of the limits applicable for managerial and other directors under item (A) of Section II of Part II of Schedule V of the Companies Act, 2013 (18 of 2013) and the limit applicable under Section I of the said Part.
Explanation.—For the purposes of this regulation, any reference to a company in Section I or Section II shall be construed as a reference to the Institution.
(3) The Board may, after considering the recommendations made under sub-regulation (1), determine the salary and allowances in respect of the Managing Director, Deputy Managing Directors, officers and other employees of the Institution, while ensuring that the total managerial remuneration payable by the Institution to its directors in respect of a financial year does not exceed the limits referred to in sub-regulation (2). - Deputation.—
(1) Any officer or other employee may be taken on deputation by the Institution for a period not exceeding five years from an institution including an infrastructure finance or development institution.
(2) The terms and conditions of service of any officer or other employee taken on deputation shall include the following, namely:—
(a) the terms and conditions of service during the period of deputation shall be such as may be determined by the Nomination and Remuneration Committee;
(b) if the officer or other employee taken on deputation is from an institution in which the Central Government holds not less than fifty-one per cent. of the paid-up equity share capital, the terms and conditions of his service during the period of deputation shall not be less favourable than those of his service in such institution. - Mechanism for determining penalties.—
(1) The Nomination and Remuneration Committee shall be the authority to determine penalties under sub-section (1) of section 39.
(2) The Nomination and Remuneration Committee may by order, after giving a reasonable opportunity of being heard to the director or the employee against whom a complaint is made in writing by a person authorised by the Institution for violating the provisions of section 16 or section 19, as the case may be, impose penalty on such director or employee who has violated such provisions.
(3) For the purposes of determining penalties, the Nomination and Remuneration Committee may— (a) require the attendance of and examine—
(i) the director or employee against whom the complaint for the violation has been made;
(ii) any other director, officer or employee of the Institution;
(iii) any other person under the control of the Institution;
(b) require the production of any document or other electronic record held by or under the control of the Institution;
(c) allow any other person to give evidence, if it considers it relevant;
(d) require the production of any other document or record, if it considers it relevant.
(4) A director or employee aggrieved by any order made by the Nomination and Remuneration
Committee under subregulation (2), may prefer an appeal to the Board within thirty days from the
date of receipt of such order, and the Board shall, after giving him a reasonable opportunity of being heard, pass such order as it may deem fit, either confirming, modifying or setting aside the order appealed against, or by order remand the case to the Nomination and Remuneration Committee for disposal.
(5) Where the director against whom the complaint has been made is a member of the Nomination and Remuneration Committee or the Board, as the case may be, he shall not participate in any meeting thereof in which the complaint is being deliberated upon:
Provided that, if on account of such director not participating in the meeting, the requirement of quorum or of the independent directors constituting the requisite minimum membership or majority of the Nomination and Remuneration Committee cannot be met, the Board may nominate another director in this place.
Also Read: The National Bank for Financing Infrastructure and Development General Rules, 2022.
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