Heeding to the calls for a Development Financial Institution (DFI), Finance Minister Nirmala Sitharaman announced the setting up of one to act as a provider, enabler and catalyst for infrastructure financing. The DFI will be capitalised with a funding of ₹20,000 crore, and is expected to have a lending portfolio of ₹5-lakh crore in three years.
This move will be an important step towards mobilising resources and to increase funding for the National Infrastructure Pipeline (NIP).
The concept of DFI is not new to India. The country’s first DFI was operationalised in 1948, with the setting up of the Industrial Finance Corporation of India (IFCI).
Then came the Industrial Credit and Investment Corporation of India (ICICI) and the Industrial Development Bank of India (IDBI) to promote long-term financing for infrastructure projects and industry. However, over the last 10-15 years, they transformed into universal banks and lost focus on infrastructure lending.
Global examples
According to an industry veteran, globally, most developing and developed markets have such institutions which are government owned.
These DFIs support economic growth and development because they can take certain risks which commercial institutions like banks cannot take.