The finance minister, in the Budget speech, had promised that the new DFI would be professionally managed. This was interpreted by most observers to indicate it would have a large, preferably a controlling, share for the private sector and the management would be selected accordingly. However, it now transpires that the state-controlled India Infrastructure Finance Company (IIFCL) will serve as the seed for the new DFI.
In this context, our
lead editorialnotes that a bail-out of IIFCL and a renaming, alongside a line of credit that will probably allow the new institution to repeat the mistakes of the old. It is hard to see how and why any private-sector pool of long-term capital would want to go into business with such an institution.
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DFI likely to be set up with IIFCL s paid-up capital of Rs 10,000 crore A new government-owned development finance institution (DFI) is likely to be set up with India Infrastructure Finance Company’s (IIFCL’s) paid-up capital of Rs 10,000 crore and an equivalent amount from budgetary support. It may have a lower minimum capital adequacy ratio of 9 per cent, compared to 12-15 per cent for non-banking financial companies. The Reserve Bank of India (RBI) Act and the Banking Regulation Act may be amended to set up the DFI for enabling it access to a line of credit, according to the draft Cabinet note, said sources.
Budget 2021: Govt likely to announce new national bank to finance infra projects
Various reports suggest that the ministry of finance has prepared a draft of the bill called - the National Bank for Financing Infrastructure and Development Bill, 2020
BusinessToday.In | February 1, 2021 | Updated 09:14 IST
Finance Minister Nirmala Sitharaman may announce a national bank to finance infrastructure projects in the upcoming budget.
Various reports suggest that the ministry of finance has prepared a draft of the bill called - the National Bank for Financing Infrastructure and Development Bill, 2020.
The proposed bank may have an authorised capital of one lakh crore rupee and twenty thousand crore rupees as an initial paid-up capital.