Centre likely to set up DFIs to meet infra funding needs

NEW DELHI: The Budget may announce the creation of a mega development finance institution (DFI) by merging some existing financial institutions in an attempt aimed at meeting the long-term financing needs of new, stalled and work-in-progress infrastructure projects worth over ₹100 lakh crore, people aware of the development said.

A large DFI is necessary for rapid infrastructure development, likely to be one of the key focus areas of budget 2021-22.

Infrastructure development will put India on the higher growth trajectory with its cascading impact on every sector of the economy, the people added, requesting anonymity.

The Union Budget will be presented by finance minister Nirmala Sitharaman on February 1. The Budget for fiscal year 2021-22 is expected to focus on reviving the economy, hit hard by the Covid-19 pandemic and 68-day-long nationwide lockdown imposed on March 25 to check its spread.

There is a need for a mega development finance institution as commercial banks are not suited for long-term financing of infrastructure projects with very long gestation period, the people cited above said. They added that apart from funding new projects, such an institution could also help revive stalled projects worth at least 10 lakh crore.

“Most of these projects are languishing because of fund crunch,” one of the people, a government official said.

The proposed mega DFI, “which may include an existing financial institution and some existing funds, will meet the long-term financing need of these projects,” he said.