What’s in the news?

• The Union Cabinet has cleared the introduction of a bill to set up a Development Financial Institution (DFI) to finance long-term funds to infrastructure projects as well as for development needs of the country.
• The government had announced the setting up of the DFI in the latest Union Budget and it hopes to introduce the bill during the current session of Parliament. 

About DFI

• The DFI will be set up with an initial paid-up capital of Rs 20,000 crore. Besides, the government will give Rs 5,000 crore as grant to the institution.
• Through this, the government expects to raise up to Rs 3 lakh crore in the next few years.
• The government intends to use the tax benefits to enable the financial institution to raise funds from investors. 

DFI Board

• The DFI will be fully government-owned initially and it will be brought down to 26 per cent in the next few years. At all times, the government will continue to hold 26 per cent in the entity. 
• DFI would have a professional board with at least 50% non-official members.

Significance

• As of December 2019, there were over 6,000 brownfield and greenfield projects requiring funding.
• Once the DFI comes into existence, the country will have an institution and institutional arrangement which will help in raising long-term funds.

Reference:

1. https://www.thehindu.com/news/national/cabinet-approves-bill-to-set-up-dfi/article34083167.ece