Development Finance Institution have some tax benefits for a 10-year long period
In order to provide a boost for infrastructure development in the country, the Union Cabinet headed by Prime Minister Narendra Modi on Tuesday approved the formation of the National Bank for Infrastructure Development. The cabinet cleared the setting up of the Development Finance Institution (DFI) with a capital infusion of Rs 20,000 crore, announced Finance Minister Nirmala Sitharaman in a cabinet briefing on Tuesday, March 16. The Development Finance Institution will help raise long-term funds. It will also have some tax benefits for a 10-year long period, said Ms Sitharaman. The proposed legislation will give effect to the announcement made by Finance Minister during her Budget 2021 speech on February 1.
According to cabinet briefing, 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 have a professional board and 50 percent of them will be non-official directors.
The Finance Minister added that the government is also planning to issue some securities to the Development Finance Institution, by which the cost of funds will come down. This will help the DFI leverage initial capital and draw funds from various sources and will also have a positive impact on the bond market in the country.
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. Around 7,000 projects have been identified under the National Infrastructure Pipeline (NIP) with a projected investment of Rs 111 lakh crore during 2020-25.