How to make the DFI model work
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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.
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.
IIFCL may be subsumed into new DFI: DFS Secretary
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Last Updated: Feb 03, 2021, 07:47 AM IST
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Synopsis
Department of Financial Services secretary Debashish Panda said the proposed DFI would come under the regulatory supervision of the Reserve Bank of India and gradually the government’s stake in the company would be brought down to 26%.
About 7,000 projects have been identified under the NIP with projected investment of a whopping Rs 111 lakh crore during 2020-25.
NEW DELHI: India
Infrastructure Finance Company Ltd (IIFCL) may be subsumed into the proposed development finance institution (DFI) being set up to accelerate infrastructure financing and the private sector will also be able to float such entities, Department of Financial Services secretary Debashish Panda said.
Finance Minister Nirmala Sitharaman on Monday said the government will set up a Rs 20,000 crore Development Finance Institution (DFI) with a view to mobilise Rs 111 lakh crore required for funding of the ambitious national infrastructure pipeline. Unveiling the Union Budget 2021-22, the Finance Minister said that a professionally-managed DFI to be set up to provide, enable and catalyze infrastructure financing. The government proposes Rs 20,000 crore to capitalise this institution and aims to have a lending portfolio of at least Rs 5 lakh crore in three years, she said. Accordingly, I shall introduce a bill to set up a DFI. I have provided a sum of Rs 20,000 crore to capitalise this institution. The ambition is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years time, she said.
Will allow private sector to set up DFIs too, Nirmala Sitharaman tells News18, hours after Budget speech Typically, DFIs don t accept public deposits and they generally raise capital by borrowing funds from the government and selling their bonds to the general public FP Staff February 01, 2021 22:34:11 IST File image of Nirmala Sitharaman. News18
Speaking to
Network18 group editor-in-chief Rahul Joshi, finance minister Nirmala Sitharaman said the Centre will soon bring in provisions to allow the private sector to set up Development Finance Institutions (DFIs).
This, just hours after Sitharaman announced in her Budget speech that the Government of India would set up a Rs 20,000 crore DFI with a view to mobilise Rs 111 lakh crore required for funding of the ambitious national infrastructure pipeline.