Pooled Finance Development Fund Scheme

The Pooled Finance Development Fund Scheme (PFDF) has been set up by the Central Government of India. The main aim of the Government authorities is to provide credit enhancement facilities to Urban Local Bodies (ULBs) based on their credit worthiness. This will enable them to access market borrowings through state-level pooled mechanism. PFDF is to ensure availability of resources to Urban Local Bodies in order to improve urban infrastructure and ultimately attain the goal of self-sustainability.

Background

The growth rates in India that are reflected each financial year are largely driven by the growth in the urban areas and cities. The rural sector in India has limited potential, being majorly dependent on agriculture. Also, the continuous decline observed in the national poverty levels are being determined largely on the basis of urban cities. The Urban Local Bodies are responsible for undertaking majority of the urban infrastructure development projects. They are largely dependent on the funds provided by either the state governments or the local agencies. The poor administration in these local bodies pose a hurdle in financing such projects. They are unable to raise resources from the market/financial institutions for investment in infrastructural projects. In spite of the existing programmes of both the central and the state governments was a continuous gap between the availability and extent of requirements of funds for such projects, more commonly found in small and medium-sized cities. The Government thus, realized the need to provide direct access to capital markets for such cities. In order to make the local bodies self-sufficient and to ensure availability of resources at all times, the Government introduced the Pooled Finance Development Fund Scheme.