Proposal for Setting up of “Development Finance Institution Approved

The Union Cabinet approved a bill to set up a Development Finance Institution(DFI). It will be called National Bank for Financing Infrastructure and Development (NaBFID).

About National Bank for Financing Infrastructure and Development (NaBFID):

Initially, the Government of India will own it with a 100% stake.
They will gradually bring it down to 26% in a few years.
It will provide finance for social and economic infrastructure projects identified under the National Infrastructure Pipeline(NIP).
A professional board with at least 50% of the members as non-official directors.
The capital infusion by the Government will be Rs 20,000 crore with an initial grant of Rs 5,000 crore.
It is later expected to raise around Rs 3 lakh crore in the next few years by Market funds.
The government will provide a 10-year tax exemption to funds invested in the DFI.

What is a Development Finance Institution(DFI)?

DFI is an agency that finances infrastructure projects of national importance.
These agencies are government-owned.
Their borrowings enjoy government guarantees which help bring down the cost of funding.
The first DFI in India was the Industrial Financial Corporation of India(IFC).
It got launched in 1948.

Source: TH

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