Finance
By: Shree1news, 22 DEC 2020
The government plans to set up a Development Finance Establishment (DFI) within the subsequent three to four months with a view to mobilise Rs 111 lakh crore required for funding of the ambitious national infrastructure pipeline, based on Financial Services Secretary Debasish Panda.
“We need a development financial institution as infra financing needs patient capital, and banks are currently not suited to lending for long term projects which do not generate any cash for years,” he informed.
Even deepening the bond market with regard to infrastructure financing is a matter which is receiving consideration of the government and there is a need to do one thing more in order to have a robust bond market for infrastructure financing, he stated.
“To provide funding, to enhance credit rating of projects, a DFI is needed, and we are actively working on it, and soon such an institution will be in place. We are in the process of finalising details such as shareholding of the government and whether such a body can be formed through a statute.
“The DFI will be a catalyst, and would fund projects where others are not keen to enter because of the risks involved,” he stated.
Further, Panda stated the work is in progress and the DFI ought to develop into a actuality quickly, could also be by the top of the present monetary year or early next year.
In her last Budget speech, Finance Minister Nirmala Sitharaman had proposed to set up DFIs for promoting infrastructure funding. About 7,000 projects have been recognized below the National Infrastructure Pipeline (NIP) with projected funding of a whopping Rs 111 lakh crore during 2020-25.
NIP, a first-of-its-kind initiative to offer world-class infrastructure throughout the nation and enhance the standard of life for all citizens, can be essential for attaining the goal of becoming a USD 5 trillion economy by FY 2025.
The DFI, Panda stated, could have a key developmental role other than the financing role.
“All kinds of innovating financial mechanisms is what this new institution will be expected to do,” he stated.
During the pre-liberalised era, India had DFIs which were primarily engaged in development of industry within the nation. ICICI and IDBI, in their previous avatars, were DFIs. Even the country’s oldest financial institution IFCI Ltd had acted as a development finance institution.
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) got here into existence in 1964 to promote long-term financing for infrastructure projects and industry.
Talking about the financial health of banks, Panda stated that 11 out of the 12 public sector banks have posted income as on September 30, 2020.
Even gross Non-Performing Assets (NPAs) have gone down considerably and the provision coverage ratio has increased, he noted.
“There is scope for improvement on return on assets and banks are working on that. By and large, all the financial parameters are showing positive results,” he stated.
Source: A-N
