Union Cabinet Clears Bill For Setting Up DFI

The Union Cabinet to set up a development finance institution (DFI) to finance long-term infrastructure projects, finance minister Niramal Sitharaman announced. The government has already allocated ?20,000 crore in FY22 during Budget 2021 to capitalise the institution

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Published - Thursday, 18 Mar, 2021

Union Cabinet Clears Bill For Setting Up DFI

The Union Cabinet to set up a development finance institution (DFI) to finance long-term infrastructure projects, finance minister Niramal Sitharaman announced. The government has already allocated ?20,000 crore in FY22 during Budget 2021 to capitalise the institution. "Past attempts to have alternative investment funds were taken up, but for various reasons, we ended up with no bank which could take up long-term risk (which is very high) and fund development. The Cabinet has cleared this bill, through which we will have an institution and institutional arrangement, which will help in increasing long term funds," Sitharaman mentioned. The proposed DFI will have 50% non-official directors. DFI will have certain tax benefits for ten years. The central government is also planning to issue some securities to Development Finance Institution, by which cost of funds will come down. "All this will help DFI leverage initial capital and draw funds from various sources; will also have positive impact on bond market in India," finance minister added. DFI will start with 100% govt ownership and gradually brought down to 26%, she said. In her Budget 2019-20 speech, Sitharaman had proposed a study for setting up DFIs for promoting infrastructure funding. About 7,000 projects have been identified under the National Infrastructure Pipeline (NIP) with a projected investment of a whopping ?111 lakh crore during 2020-25.