How to make the DFI model work
Infra woes The long gestation period skews asset-liability flows - Bloomberg×
A professional company staffed with personnel with superior project finance and credit appraisal skills is the need of the hour
In her recent Budget speech, Finance Minister Nirmala Sitharaman proposed to revive development financial institution (DFI) model to act as a provider, enabler and catalyst for infrastructure financing.
The government provided ₹20,000 crore to capitalise the DFI to meet its ambitious loan target of ₹5-lakh crore within three years. After the transformation of the erstwhile DFIs Industrial Development Bank of India (IDBI) and Industrial Credit and Investment Corporation of India (ICICI) into universal banks, there was a vacuum in the DFI space, in general, and infrastructure financing, in particular.
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Making DFIs work
Project assessment skills and tax sops needed
The government’s latest Budget proposes to set up a Development Finance Institution soon to fund the ambitious national infrastructure pipeline.
“Infrastructure needs long-term debt financing. A professionally managed Development Financial Institution is necessary to act as a provider, enabler and catalyst for infrastructure financing,” the Finance Minister had said in her Budget speech.
Finally, wisdom has dawned on the government machinery to understand the importance of development financial institutions and how callous we were in allowing Industrial Credit and Investment Corporation of India (ICICI) and Industrial Development Bank of India (IDBI) to exit from the scene.