Govt sets Rs 1-trillion infrastructure lending target for DFI

The Centre has set a target of about Rs 1 trillion for government-backed National Bank for Financial Infrastructure and Development (NaBFID) for sanctioning loans to the infrastructure sector in the next financial year.

The government-backed Development Finance Instit­ut­ion (DFI) will start operations in the first quarter of the next financial year, finance ministry officials have infor­m­ed lawmakers. To catalyse investment in the fund-star­v­ed infrastructure sector, the DFI plans to invest in infrast­r­ucture projects in India and outside with a focus towards prioritising systemic risk mitigation and credit enhancement.

An action plan is being prepared on making the newly set up DFI functional and operationalising the Rs 1-trillion target, officials from Department of Financial Services (DFS) told the Parliamentary Standing Committee on Finance. 

The government has infused Rs 20,000 crore as equity in the DFI, and an additional Rs 5,000 crore has been given as grants to NaBFID. The Centre had sought an additional outgo of Rs 13,050 crore for transferring Rs 20,000 crore to the DFI in the supplementary demand for grants last week. Most of this demand was met through savings or allocation of unspent funds of other departments.

In October last year, the government had appointed KV Kamath as the chairman of NaBFID. Recently, Kamath said the DFI, with a capital base of Rs 20,000 crore, will provide funding to projects in public as well as private sectors. NaBFID will start  operations by approving the first loan for the project in the first quarter of the next financial year.

The government expects the DFI to plug the gap in infrastructure financing as banks have been wary of investing in long-gestation projects. The DFI will get 10-year tax concession so that it can provide long-term funds at an affordable cost to the infrastructure sector.

The institution is also touted to be a market maker for broadening the bond market. It will lend or invest in infrastructure projects, issue debt securities and promote securitisation of loan portfolio of companies engaged in development and financing of infrastructure to create and develop a secondary market for securitisation receivables. It will get government guarantees at a concessional rate of up to 0.1 per cent for borrowing from multilateral institutions, sovereign wealth funds, and other such foreign institutions.

The Banks Board Bureau (BBB) is looking for candidates to head the DFI, and is offering hefty pay packages. It has relaxed certain eligibility criteria for the position of managing director of DFI, and has extended the last day for applying for the post to March 25. It is also seeking applications for three positions of deputy managing directors for its lending and project finance vertical and a chief risk officer, and chief financial officer.

Last November, the Centre nominated Pankaj Jain and Sumita Dawra as directors on the NabFID board.