Two Tamil finance ministers set up infrastructure lender

Chenai: The creation of financial institutions to fund infrastructure projects is one of the common threads between Finance Minister Nirmala Sitharaman and former Finance Minister P. Chidambaram.

It was in 1996 when the then Minister of Finance, P. Chidambaram of Tamil Nadu, during his budget speech, announced the establishment of the Infrastructure Development Finance Company Ltd (IDFC) to finance infrastructure projects. ‘infrastructure.

“Infrastructure needs long-term financing, usually 15-20 year financial instruments. However, it has not been possible to launch such instruments in the Indian market so far. Therefore, I propose the establishment of an infrastructure development finance company (IDFC),” Chidambaram said at the time.

“This company will be incorporated with an authorized share capital of Rs 5,000 crore,” he had said.

Among other things, the IDFC will act as a direct lender, a refinancing institution and a provider of financial guarantees, Chidambaram said.

IDFC was incorporated as a Non-Banking Financial Company (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 his budget speech the establishment of a Development Finance Institution (DFI) to finance infrastructure projects.

“Infrastructure needs long-term debt finance. A professionally managed development finance institution (DFI) is needed to act as a provider, facilitator and catalyst of infrastructure finance. Accordingly, I will introduce a bill to establish 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 IFD in three years,” Sitharaman said.

The Union cabinet on Tuesday approved the budget proposal to set up a dedicated infrastructure lender.

The DFI will be formed with a seed capital of Rs 20,000 crore. It will be managed by a professional board and is expected to attract capital from the market, Sitharaman told media after the cabinet meeting.

(Venkatachari Jagannathan can be contacted at [email protected])

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