Finance Minister Nirmala Sitharaman today announced that the Union Cabinet has cleared the setting up the Development Finance Institution (DFI), as announced for the duration of the Union Budget 2021, with an initial capital infusion will stand at Rs 20,000 crore. “Through this, we expect to raise a considerable amount through the market,” the Nirmala Sithraman mentioned. She added that the DFI is anticipated to raise up to Rs 3 lakh crore in the next couple of years. The government expects to rope in marquee pension funds, sovereign funds to come in by way of the DFI to fund infra projects in the nation. The bill will now be tabled in Parliament for the duration of the existing Budget Session.
DFI is anticipated to raise extended-term funds for infrastructure improvement in the nation. The Finance Minister, today, mentioned that the initial grant to the DFI will be Rs 5,000 crore and added increments of grants will be created inside the limit of Rs 5,000 crore. “Government is also planning to issue some securities to the DFI by which the cost of funding will come down,” Nirmala Sithraman mentioned. “All this will help DFI leverage initial capital and draw funds from various sources will also have a positive impact on bonds markets.”
The board of the DFI will comprise persons of eminence. The Finance Minister additional stated that incentives for the board will be market place-driven. The Chief Executive of the board will have a larger age limit and a longer tenure. The board of DFI will choose on the merger of India Infrastructure Finance Company into the DFI. The government of India will have one hundred% ownership of the DFI, as soon as set up. However, the ownership will come down to 26% more than the years.
Earlier, for the duration of her Union Budget speech, the Finance Minister had announced the plans to set up the DFI as a provider, enabler and catalyst for infrastructure financing. The ambition of the DFI is to have a lending portfolio of Rs 5 lakh crores in 3 years time.
Post the Union Budget announcement, HDFC Securities had mentioned that the setting up of a DFI would be a damaging for sovereign-owned NBFCs such as PFC and REC. “A better alternative would have been to re-purpose existing sector-specific sovereign-owned NBFCs with a broader infra mandate,” HDFC Securities had mentioned.