ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Development Finance Institutions in India

Past, Present and the Future

Development Finance Institutions in India

A historical trajectory of the evolution of development finance institutions in post-independence India in the context of the renewed interest in them is necessary to draw a few appropriate lessons. They are indispensable for infrastructure development and the incorporation of lessons from past experiences will help to set up robust and well-functioning DFIs.

The union finance minister in her budget speech for 2021–22 has proposed to create a new development finance institution (DFI) to accelerate the pace of infrastructure development in the country. The initial capitalisation of this DFI is to be `20,000 crore and it is expected to create a lending portfolio of `5,00,000 crore over the next three years.

DFIs have historically played a very significant role in India’s post-independence economic growth. They were esta­blished as institutions for financing indu­strial growth with a specific focus on term finance and were to be vehicles for economic development. In light of the renewed focus on DFIs and their role in economic growth, this article aims at exploring three themes: (i) the importance of DFIs for promoting infrastructure and overall development of the economy, (ii) the role that they have historically played in India’s economic growth, and (iii) the lessons that can be drawn from the historical experience, and their future scope and relevance.

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Updated On : 27th Jul, 2021

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