Two Tamil finance ministers set up infra lenders
By Venkatachari Jagannathan
Chennai, March 16 (IANS): The establishment of financial institutions to finance infrastructure projects is one of the common points between the Minister of Finance Nirmala Sitharaman and the former Minister of Finance P. Chidambaram.
It was in 1996 that the then Minister of Finance, P. Chidambaram of Tamil Nadu, during his budget speech, announced the creation of the Infrastructure Development Finance Company Ltd (IDFC) to finance the development projects. ‘infrastructure.
“Infrastructure needs long-term financing, usually financial instruments over 15 to 20 years. However, it has not been possible to float such instruments in the Indian market so far. Therefore, I propose the creation of an infrastructure development finance company (IDFC), said Chidambaram at the time.
“This company will be incorporated with an authorized share capital of Rs 5,000 crore,” he said.
Among other things, the IDFC will act as a direct lender, as a refinancing institution and as a provider of financial guarantees, Chidambaram said.
IDFC was incorporated as a Non-Bank Financial Corporation (NBFC) with its head office in Chennai. It was the first infrastructure lender to be based in Chennai.
Twenty-five years later, in 2021, Sitharaman, another Tamil-born finance minister, announced in her budget speech the establishment of a Development Finance Institution (DFI) to fund infrastructure projects.
“Infrastructure needs long-term debt financing. A professionally managed development finance institution (DFI) is needed to act as a provider, catalyst and catalyst for infrastructure finance. Accordingly, I will present a bill to create a DFI. I have provided a sum of Rs 20,000 crores to capitalize this institution. The ambition is to have a loan portfolio of at least Rs 5 lakh crores for this DFI in three years, ”Sitharaman said.
The Union cabinet on Tuesday approved the budget proposal to create a dedicated infrastructure lender.
The DFI will be formed with seed capital of Rs 20,000 crore. It will be managed by a professional council and is expected to attract capital from the market, Sitharaman told media after the cabinet meeting.