The much-anticipated development finance institution will be exempt from taxation, Finance Minister Nirmala Sitharaman said on Tuesday.
In her reply in the debate on the Union Budget FY22 in the Parliament, she said that the government has created an infrastructure pipeline to be funded through the National Bank For Financing Infrastructure and Development (NABFID) and has identified a total of 7,000 infrastructure projects both at the Central and state level.
While Sitharaman did not spell out the details of the tax exemption being accorded to the new DFI, it is understood the said relief would be in the nature of a income tax holiday.
The government introduced The National Bank For Financing Infrastructure And Development (NABFID) Bill, 2021 in the Lok Sabha on Monday.
The development finance institution to be set up by the Centre will be allowed to acquire businesses of other institutions involved in infrastructure financing of projects, said the bill.
Among the various functions of the institution, the bill said that it can "acquire an undertaking including the business, assets and liabilities of any institution, the principal object of which is the promotion or development of infrastructure financing for projects located in India, or partly in India and partly outside India".
Apart from lending for infrastructure projects, it will extend loans and advances to any company or statutory corporation or trust or any financial institution funding infrastructure, for the purposes of providing financial assistance for infrastructure projects located in India, or partly in India and partly outside India.
It will also take over or refinance existing loans extended by a lender for infrastructure projects located in India, or partly in India and partly outside India and transfer loans and advances granted by it, with or without the securities, to trusts, for consideration.
The development finance institution will also set aside loans or advances it holds and issue and sell securities based upon such loans or advances so set aside in the form of debt obligations, trust certificates of beneficial interest or other instruments, by whatever name called, and act as a trustee for the holders of such securities.
It will borrow money from the Central government, scheduled banks, financial institutions, mutual funds, any class of persons, and from any other institution or authority or organisation notified by the Central government, on such terms and conditions as may be agreed upon and accept short term loans only for managing asset liability mismatches and not for any other business purpose.