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 In a bid to attract investments into the country's infrastructure sector, the government will notify Infrastructure Debt Funds eligible to raise funds by issuing tax efficient "zero coupon bonds".

A zero-coupon bond is a debt security that does not have to pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.

"In order to allow funding of infrastructure by issue of Zero Coupon Bonds, I propose to make notified Infrastructure Debt Funds eligible to raise funds by issuing tax efficient Zero Coupon Bonds," Finance Minister Nirmala Sitharaman said while presenting the Union Budget 2021-22.

On the National Infrastructure Pipeline (NIP), which was launched with 6,835 projects, the minister said that the project pipeline has now expanded to 7,400 projects.

Around 217 projects worth Rs 1.10 lakh crores under some key infrastructure ministries have been completed, she said.

Sitharaman also announced setting up of a Development Financial Institution to act as a provider, enabler and catalyst for infrastructure financing.

"Accordingly, I shall introduce a Bill to set up a DFI. I have provided a sum of Rs 20,000 crore to capitalise this institution. The ambition is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years time," she said.

She added that debt financing of InVITs and REITs by Foreign Portfolio Investors will be enabled by making suitable amendments in the relevant legislations. This will further ease access of finance to InVITS and REITs thus augmenting funds for infrastructure and real estate sectors, the minister said.