The newly-proposed Development Finance Institution (DFI) will initially be completely owned by the government, Economic Affairs Secretary Tarun Bajaj told Moneycontrol. However, during later stages, private players will be allowed to enter this niche financial segment.
“To begin with, the DFI will be 100 percent government owned. Later on, it will get in more stakeholders as per its financing needs,” he said.
Private stakeholders will be allowed to enter the field and set up private DFIs through a special legislation and under RBI’s enabling license provisions. “There will be a provision that if in the later stages, the DFI wants to diversify its equity, it will be able to do that. The DFI will be able to access low-cost funds so it can lend competitively for infrastructure financing needs,” Bajaj said.
Finance Minister Nirmala Sitharaman had on February 1, proposed creation of a DFI to accelerate investment in infra sector as a part Union Budget 2021.
“Infrastructure needs long-term debt financing. A professionally managed Development Financial Institution is necessary to act as a provider, enabler and catalyst for infrastructure financing,” Sitharaman had said in her Budget speech.
The DFI is seen as a major policy decision in Budget 2021 which itself focuses on higher Capex spend on infra creation. Sitharaman had announced to set up the DFI with a Rs 20,000 crore corpus.
The Union Budget 2021 is pin-pointedly focused on infra generation to trigger economic growth. The Finance Minister has proposed to raise the FY22 Capex by around 35 per cent to Rs 5.54 crore.
Earlier this week, Financial Services Secretary Debashish Panda confirmed that the DFI will be named the National Bank for Financing Infrastructure and Development.
Chief Economic Advisor Krishnamurthy Subramanian had also told Moneycontrol that the bill for the new DFI could be tabled later in the current Budget Session of Parliament or early in the Monsoon Session.