The Indian government has cleared a proposal to set up a development finance institution, Finance Minister Nirmala Sitharaman said after a cabinet meeting on Tuesday. The plan to set up a DFI was announced in the Union Budget, with an initial capital infusion of Rs 20,000 crore.
The DFI will be able to leverage the initial capital to fund projects of up to Rs 3 lakh crore, Sitharaman said. While details of the structure of the DFI are still to emerge, certain special provisions will be brought in to support the DFI.
The DFI, called the National Bank For Financing Infrastructure And Development, will be 100% government owned. Over time, the government’s holding may come down to 26%.
The institution will get “tax benefits”, Sitharaman said. The government will also give it certain “securities” to bring down cost of funds, she added.
The DFI will have a professional board. It will be led by a person of eminence, who will be given a longer tenure and a higher applicable age limit. “Emoluments given will be market driven,” Sitharaman said.
Commenting on speculation that the existing IIFCL Ltd. will be merged into the new DFI, the finance minister said this decision will be taken by the board of the new organisation.