Govt approves DFI to fund long-term infra projects

The Union government has approved the setting up of a Development Fund Institution (DFI). The Finance Minister informed that the new national bank will use markets to generate capital and will invest funds into long gestation period projects taking 15 to 20 years for execution. Both developmental and financial objectives will matter for setting up a DFI. The Union Budget 2021 will provide a capital infusion of ₹20,000 crore and an initial grant of ₹5,000 crore for it. The government expends the DFI to raise to ₹3 lakh crore in the next few years because it can access the market and capitalize on funds that are not otherwise available.

The new institution is based on the building blocks of the National Infrastructure Investment Fund (NIIF). The Indian Stamp Act has also been amended to allow big pension funds, sovereign funds, and insurance funds to put in their money. Through this, the longer-term funds will be better placed to fund long-term projects, which face a higher risk than short-term projects.