Development Finance Institution

27 Mar Development Finance Institution

(GS PAPER-3 Investment Models

Source- India Today)

Context

 Recently cabinet has approved the setting up of Development Finance Institution with an initial capital infusion of rupees 20000 crore

 key points

•  Finance minister in the union budget 20-21 has stated that India will set up a new DFI called the National bank for financing infrastructure and development
• DFI will start with 100% government ownership and will gradually be brought down to 26%
• DFI  will have a professional board  and 50% of them will be non official directors
•  initial capital infusion of 20000 crore will help in raising  up to 3 lakh crore in the next few years
• DFI would seek to raise funds from global pension and insurance sectors for investment in new project carrying certain tax benefit
• Sources of capital of the banks is national or International development fund

 Background

•  the first DFI was the first industrial Financial Corporation of India that was launched in 1948
• IDBI, UTI,NABARD,EXIM Bank  are the other major DFIs
•  Later several of them were converted into bank  like ICICI, IDBI Banks etc

 objective of DFI

•  To mobilize the 111  lakh crore required for funding of the ambitious National infrastructure pipeline
•  As India does not have a Development Bank DFI would fulfil the need to have an institutional mechanism

-Khyati Khare

Download Current Affairs of 27th March 2021