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Govt to set up Rs 20,000 cr DFI to promote infra financing: FM Sitharaman

FM said the govt will set up a Rs 20,000 crore Development Finance Institution with a view to mobilise Rs 111 trillion required for funding of the ambitious national infrastructure pipeline.

Budget 2021 | Union Budget | Finance Ministry

Press Trust of India  |  New Delhi 

nirmala sitharaman
Finance Minister Nirmala Sitharaman | Photo: @ANI

Finance Minister on Monday said the government will set up a Rs 20,000 crore Development Finance Institution (DFI) with a view to mobilise Rs 111 lakh crore required for funding of the ambitious national infrastructure pipeline.

Unveiling the 2021-22, the Finance Minister said that a professionally-managed DFI to be set up to provide, enable and catalyze infrastructure financing.

The government proposes Rs 20,000 crore to capitalise this institution and aims to have a lending portfolio of at least Rs 5 lakh crore in three years, she said.

"Accordingly, I shall introduce a bill to set up a DFI. I have provided a sum of Rs 20,000 crore to capitalise this institution. The ambition is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years time," she said.

In her Budget 2019-20 speech, Finance Minister 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 projected investment of a whopping Rs 111 lakh crore during 2020-25.

NIP, a first-of-its-kind initiative to provide world-class infrastructure across the country and improve the quality of life for all citizens, will be crucial for attaining the target of becoming a USD 5 trillion economy by FY 2025.

The DFI will play a key developmental role apart from the financing role.

Later speaking to media, the Finance Minister said DFI is being brought in for funding the infrastructure with all lessons learnt from IDBI which started as a DFI and became commercial bank in 2004.

She also said even private sectors can set up their own DFIs as needs of infrastructure funding is high.

During the pre-liberalised era, India had DFIs which were primarily engaged in development of industry in the country. ICICI and IDBI, in their previous avatars, were DFIs. Even the country's oldest financial institution IFCI Ltd acted as a DFI.

In India, the first DFI was operationalised in 1948 with the setting up of the Industrial Finance Corporation (IFCI). Subsequently, the Industrial Credit and Investment Corporation of India (ICICI) was set up with the backing of the World Bank in 1955.

The Industrial Development Bank of India (IDBI) came into existence in 1964 to promote long-term financing for infrastructure projects and industry.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Mon, February 01 2021. 20:44 IST