On Tuesday, June 8, Finance Minister Nirmala Sitharaman said that the National Bank for Financing Infrastructure and Development to be constituted with a fund of Rs 20,000 crore.
“The fund will give a new impetus to infrastructure development goals for building a new and prosperous India,” she tweeted.
Long-term support to infrastructure projects
-Development Finance Institution (DFI), under the National Bank for Financing Infrastructure and Development, will provide long-term capital support to infrastructure projects.
-The Rs 20,000 crore fund will be infused into the institution with an immediate injection of Rs 5,000 crore.
-DFI will have a lending portfolio of over Rs 5 lakh crore in 3 years which would provide a major boost to infrastructure.
About the National Bank for Financing Infrastructure and Development
The National Bank for Financing Infrastructure and Development Bill was introduced in the Lok Sabha on March 22, 2021. The Union Cabinet had approved the Bill earlier this year which set up DFI.
The National Bank was set up for funding infrastructural and development activities of long-term non-recourse infrastructure financing in India. It also includes the development of bonds and derivatives market necessary for infrastructure financing and to carry on the business of financing infrastructure and for matters connected therewith or incidental thereto.
While presenting the union budget 2021-22, Finance Minister Sitharaman had said that Infrastructure needs long-term debt financing and a professionally managed Development Financial Institution (DFI) is necessary to act as a provider, enabler and catalyst for infrastructure financing. The DFI will be set up with a capital base of Rs. 20,000 crores and will have a lending target of Rs. 5 lakh crore in three years”.
Benefits
-The development finance institution is instrumental for economic growth, improving long-term finances, providing credit enhancement for infrastructure and housing projects, and also improving debt flows towards infrastructure projects.
-It will help in developing a deep and liquid bond market of international standards for long-term infrastructure financing in India including through widening of the issuer and investor base. It would facilitate the development of markets for interest rate derivatives, credit derivatives, currency derivatives, and such other innovative financial instruments as may be necessary for infrastructure financing.
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