The Union Cabinet on Tuesday approved a bill to set up a Development Finance Institution (DFI) to generate funds for investment in the infrastructure sector.
The proposed legislation will give effect to the Budget announcement made by Finance Minister Nirmala Sitharaman on February 1. The government has proposed Rs 20,000 crore to capitalise the institution.
"The Cabinet has cleared this bill, through which we will have an institution and institutional arrangement, which will help in increasing long term funds," she said after the meeting of the Cabinet.
The proposed DFI will have 50 per cent non-official directors, Sitharaman added.
In her Budget 2019-20 speech, Sitharaman 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 a projected investment of a whopping Rs 111 lakh crore during 2020-25.
"During Budget, we had mentioned that we will be setting up a national bank to fund infrastructure and developmental activities. Past attempts to have alternative investment funds were taken up, but for various reasons, we ended up with no bank which could take up long-term risk (which is very high) and fund development," said Sitharaman.
She said DFI will start with 100% govt ownership and will gradually be brought down to 26%.
(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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