Formation of the Development Finance Institution approved

On March 16, Finance Minister of india announced that The cabinet has cleared the setting up of the Development Finance Institution (DFI) with a capital infusion of Rs 20,000 crore. The decision will boost infrastructure development of the country.

It will help raise long-term funds. It will also have some tax benefits for a 10-year long period. It is mention worthy here that The Finance Minister in her budget 2019-20 speech, had proposed a study for setting up of Development Finance Institutions for promoting the infrastructure funding.

Basic features of DFI :

• The DFI will have a professional board and 50 percent of them will be non-official directors.
• Initially, the new institution would be owned by the government, and its stake will be cut gradually to 26 per cent.
• The initial grant will be Rs. 5,000 crore and additional increments of the grant will be made within a limit of Rs 5,000 crore.
• The DFI will seek to raise funds from global pension and insurance sectors for investment in new projects and will also have tax benefits.
• The GOI is also planning to issue some securities to the Development Finance Institution, by which the cost of funds will come down.