Industry Odisha Bureau, Jul 20: In a bid to create a stronger Development Finance Institution (DFI) so that it could lend financial support to India’s rapidly growing financial needs for infrastructure development, the Government of India (GoI) has reportedly initiated its efforts to merge the National Bank for Financing Infrastructure and Development (NaBFID) with the India Infrastructure Finance Co. Ltd. (IIFCL).
As per media reports, “The proposed merger of NaBFID and IIFCL would create an infrastructure lending giant with a combined loan book of nearly ₹1.85 trillion.”
Notably, “A Development Finance Institution (DFI) is a financial organization, often government-owned or supported, that provides funding for economic development projects, particularly in sectors where commercial banks are reluctant to lend due to high risk or long payback periods. DFIs typically focus on infrastructure, industrial development, agriculture, housing, and export finance, offering long-term credit and technical support to promote economic growth.”
Reportedly, “NaBFID was created in 2021 aiming at merging it with IIFCL, but it could be materialized then. It is a specialised development finance institution in India established to support infrastructure development by mobilising long-term non-resource finance. It also aims to address funding gaps for infrastructure projects across various sectors, including transport, energy and urban development, thereby promoting inclusive growth and economic development in the country.”
Similarly, “IIFCL is a financial institution set up by the Government of India in 2006 to provide long-term financing for commercially viable infrastructure projects across the country, primarily through Public-Private Partnerships (PPP) and other structured financing mechanisms. It operates as a Non-Banking Financial Company – Infrastructure Debt Fund-Non-Deposit taking (NBFC-ND-IFC) registered with the Reserve Bank of India.”
Media reports quoting official sources said that, ““The objective of the NaBFID-IIFCL merger is to create a stronger infrastructure financing institution with greater scale, improved balance-sheet strength and enhanced ability to raise long-term domestic and international capital.”
Media reports quoting official sources also said that, “Another ongoing merger of the Rural Electrification Corporation Limited (REC) and Power Finance Corporation (PFC) is the key behind the proposed merger of NaBFID and IIFCL. The REC-PFC merger is expected to create a new lending behemoth with a combined loan book exceeding Rs 11 trillion. But, REC-PFC merger is expected to close by April, 2027 following which the proposal for merger of NaBFID and IIFCL has now gained momentum.”
So far REC is concerned, “It is an Indian public sector company established in 1969 under the administrative control of the Ministry of Power, Government of India. It is a Maharatna company and a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India, functioning as a Public Financial Institution (PFI) and Infrastructure Financing Company (IFC).”
So far PFC is concerned, “It is under the administrative control of the Ministry of Power. PFC was conferred the title of a ‘Maharatna CPSE’ in October, 2021, and was classified as an Infrastructure Finance Company by the RBI on July 28, 2010.”
