Govt of India clears formation of Development Finance Institution for Infra projects

New Delhi, India (Urban Transport News): The Union Cabinet chaired by Prime Minister of India Narendra Modi on Tuesday approved the bill for setting up of Development Finance Institution (DFI) with an initial capital infusion of Rs 20,000 crore. The DFI will generate funds for investment in the infrastructure sector in the country.

Briefing the media after the cabinet meeting, Union Finance Minister Nirmala Sitharaman said that the DFI Bill which has been cleared by the cabinet today will now get tabled in parliament.

Finance Minister said that the government expects the DFI to raise up to Rs 3 lakh crore in the next few years. “The Cabinet has cleared this bill, through which we will have an institution and institutional arrangement, which will help in increasing long-term funds. I expect the institution to raise up to Rs 3 lakh crore ($41.36 billion) in the next few years,” she said

According to the bill, the initial grant for the DFI will be Rs 5,000 crore and there will be additional grants within a limit of Rs 5,000 crore. The DFI will have a professional board and 50 percent of them will be non-official directors.

A development finance institution (DFI) is an agency that finances infrastructure projects that are of national importance but may or may not conform to commercial return standards. In most cases, these agencies are government-owned and their borrowings enjoy the comfort of government guarantees, which help bring down the cost of funding.

Once functional, the development finance institution (DFI) would be able to fund railway, metro railways, national highways, expressways, and other major infrastructure projects in India.