Development Finance Institution

27 Mar Development Finance Institution

Posted at 27 Mar 2021 in Current Affairs by 0 Comments

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(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