Union Cabinet clears setting up of Development Finance Institution: Nirmala Sitharaman

Union Cabinet has cleared the setting up of a Development Finance Institution (DFI) for financing long term infrastructure and development projects of the country, said Finance Minister Nirmala Sitharaman in a press briefing, Tuesday.

During Budget 2021, it was mentioned that a national bank will be set up 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, the FM added.

She said capital infusion will be of about Rs 20,000 crore this year; initial grant will be Rs 5,000 crore, additional increments of grant will be made within limit of Rs 5,000 crore.

DFI will have a professional board. Persons of emminence will be a part of the board. The proposed DFI will have 50 per cent non-official directors, FM added.

This institutions will have certain tax benefits, Sitharaman informed. These benefits will be given for a 10-year period.

This is not just tax exemption; the Indian stamp act is also being given an amendment, the FM said. Through this, the government expects to woo big pension funds and sovereign funds to the DFI, she added.

The govt plans to give the institution certain securities because of which the cost of funds will also come down, Sitharaman said.