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 The government may subsume the India Infrastructure Finance Company Ltd (IIFCL) with the proposed Development Infrastructure Fund (DFI) to boost financing in the infrastructure segment.

During a post-Budget interaction on Tuesday, Secretary for Department of Financial Services, Debasish Panda noted that given the domain expertise and the trained manpower of IIFCL, the the government may consider subsuming the company into the proposed DFI.

"IIFCL may be considered for a quick start. It could be subsumed in this new financial institution, as they already have domain expertise. They have some manpower who are already trained and experience in this field...so that can could be a way of looking at it," he said.

IIFCL was established in January 2006 as a wholly owned Government of India company and commenced its operations from April 2006.

Finance Minister Nirmala Sitharaman had announced to set up a Rs 20,000 crore Development Finance Institution (DFI).

The official said that the DFI will be totally funded by the government and is expected to start a new post-Covid investment cycle in project financing.

"It will also anchor the very ambitious national infrastructure pipeline," he said. The government has also kept the window open for the establishment of private DFIs.

According to the official, the fund will give confidence to the investors, sovereign wealth funds or insurance funds among others. The institution is expected to play a key developmental role alongside its financing role, he added.

On the privatisation of banks announced in the Budget, Panda said that the two banks to be sold off will be decided only after a three-tier selection process, starting with NITI Aayog, identifying the banks, followed by a review by core group of secretaries of disinvestment, before the final approval under the alternate mechanism.

He said NITI Aayog will do the first round of selection, then the core group of secretaries of disinvestment would, then it goes to the alternate mechanism. That process has to be followed and then we will actually get to know which banks will be privatised.

The same process will be followed for the selection of the general insurance company for privatisation.

He also said that the four banks under prompt corrective action (PCA) framework would be out of the framework by the end of this fiscal. Indian Overseas Bank (IOB), Central Bank of India, UCO Bank and United Bank of India are under this framework which puts several restrictions on them, including on lending, management compensation and directors' fees.

He added that if they come out of PCA, they may also be considered for privatisation.

"The banks under PCA are performing well off late. In the last two quarters they have been in profit and they are fulfilling by and large all the parameters."