Centre to infuse Rs 20,000 cr in Development Finance Institution to boost infrastructure funding

The Centre on Tuesday approved setting up of a Development Finance Institution to pump in funds into infrastructure projects, Finance Minister Nirmala Sithraman said.

The Union Cabinet, at a meeting chaired by Prime Minister Narendra Modi, also proposed to grant Rs 20,000 crore as equity support to the Development Finance Institution (DFI) which is expected to raise Rs 3 lakh crore through markets over the next few years.

The Finance Minister will introduce a Bill in the ongoing session of Parliament to establish the DFI, which was announced in the Union Budget presented last month.

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Sitharaman said initially the new institution would be state-owned and the government would gradually reduce its stake to 26 per cent.

The DFI would seek to raise funds from global pension and insurance sectors for investment in new projects, carrying certain tax benefits, she added.

The DFI will start with a clean slate and the board will take a decision on merger or acquisition of other entities such as the India Infrastructure Finance Company Limited, Debasish Panda, Secretary, Department of Financial Services, told reporters.

The institution will have a professional board, led by a person of eminence with enough heft and stature to meet the requirements of the new century.

“The chairman will have a longer tenure and a higher age limit and will be given “market-driven” emoluments.

Sitharaman referred to institutions such as the IDBI that were established to fund infrastructure projects but gradually changed their nature of business.

The institution will have tax benefits for a 10-year long period and the government would amend the Indian Stamp Act, she said adding that the government will also give certain securities.

The DFI will fund projects identified by the national infrastructure pipeline which has listed 7,000 items and the board will decide which of them would be funded.