The government has set a target of Rs 1 Trillion for the National Bank for Financial Infrastructure and Development (NaBFID) for approving loans to the infrastructure sector in the next financial year. The Development Finance Instit­ut­ion (DFI) will start operations in the first quarter of the next financial year. The DFI is planning to invest in infrast­r­ucture projects in India to prioritise systemic risk mitigation and credit improvement.

The government has invested Rs 20,000 Crores as equity in the DFI, and an extra Rs 5,000 Crores has been granted to NaBFID. The Centre had asked for an additional outgo of Rs 13,050 Crores for transferring Rs 20,000 Crores to the DFI in the supplementary demand for grants. Most of this demand was met via savings of other departments. The government is expecting the DFI to fill the gap in infrastructure financing as banks have been doubtful of investing in long-gestation projects. The DFI will get a 10-year tax benefit to provide long-term funds at an affordable price to the infrastructure sector.

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The institutions will also lend or invest in infrastructure projects, issue debt securities and promote securitisation of the loan portfolios of firms engaged in the development and financing of infrastructure to create and develop a secondary market for securitisation receivables. It will get government guarantees at a concessional rate of over 0.1 per cent for borrowing from multilateral institutions, sovereign wealth funds, and other such foreign institutions.