Cabinet approves Bill to set up DFI for funding infra projects

New Delhi: The Union Cabinet on Tuesday approved a bill to set up a Development Finance Institution (DFI) to raise long-term capital to fund infrastructure development, as the government has envisaged an investment of Rs 111 lakh crore by 2025.

The proposed legislation will give effect to the Budget announcement made by Finance Minister Nirmala Sitharaman on February 1. The government has proposed Rs 20,000 crore to capitalise the institution.

"I am happy today the Cabinet has cleared this bill through which we will have an institution and institutional arrangement that will help in raising long-term finance. The budget provides for the initial amount. I had announced it in the budget, saying capital infusion from our side would be about Rs 20,000 crore," Sitharaman told reporters after the Cabinet meeting.

The minister further said she expects the proposed institution to raise up to Rs three lakh crore in the next few years because it will have access to the market funds, which are otherwise not available. The DFI will also get tax benefits for 10 years.

"We expect even big pension funds, sovereign funds would all come... as we are able to attract them in the national infrastructure investment fund," she said.

Replying to a query, Sitharaman said the DFI will be managed by a professional board, comprising at least 50 per cent non-official directors.

"Persons of eminence are also envisaged to be on the board. And I would think the chairpersonship also will be some imminent person," she said, adding emoluments would be market-driven to attract the best talent.