New Delhi:
Financial Services Secretary Debasish Panda on Tuesday said that India Infrastructure Finance Company Limited (IIFCL) may be subsumed into the new Development Finance Institution being set up to accelerated infrastructure financing activities.
The Union Budget 2021-22 presented in Parliament on Monday proposed setting up a Development Finance Institution (DFI) with an initial capital of Rs 20,000 crore to mobilise Rs 111 lakh crore required for funding the ambitious National Infrastructure Pipeline (NIP).
National Bank for Financing Infrastructure and Development (NaBFID), the proposed DFI, will anchor the very ambitious NIP, he said.
About 7,000 projects have been identified under the NIP with projected investment of a whopping Rs 111 lakh crore during 2020-25.
''IIFCL maybe considered for a quick start if it could be subsumed in this new financial institution because they already have some domain expertise and they have some manpower who are already trained and experienced in this field. So that could be a way of looking at it,'' he said.
He said the proposed DFI would come under the regulatory supervision of the Reserve Bank of India and the gradually the government stake in the company would be brought down to 26 per cent.
The DFI will play a key developmental role apart from the financing role.
The proposed institution will provide patient capital for infrastructure projects at an affordable cost, he said, adding, it will also help deepen the bond market.
On the development role, he said, the DFI will help an infrastructure developer to do financial closure, project monitoring and credit enhancement, among others.
''It can play the role of a facilitator and a catalytic role as far as financing infra is concerned. Secondly, it will be a market maker, and also play a very proactive role in developing the bond market and nurturing the bond market,'' he said.
On the private sector role, he said, even they can set up their own DFIs as needs of infrastructure funding is high, he said.
During the pre-liberalised era, India had DFIs, which were primarily engaged in development of industry in the country. ICICI and IDBI, in their previous avatars, were DFIs. Even the country’s oldest financial institution IFCI Ltd acted as a DFI.
In India, the first DFI was operationalised in 1948 with the setting up of the Industrial Finance Corporation (IFCI). Subsequently, the Industrial Credit and Investment Corporation of India (ICICI) was set up with the backing of the World Bank in 1955.
The Industrial Development Bank of India (IDBI) came into existence in 1964 to promote long-term financing for infrastructure projects and industry.