The Govt.of India constituted the National Investment Fund (NIF) on 3rd November, 2005, into which the proceeds from disinvestment of Central Public Sector Enterprises were to be channelized. The corpus of the fund was to be of permanent nature and the same was to be professionally managed in order to provide sustainable returns to the Govt., without depleting the corpus. NIF was to be maintained outside the Consolidated Fund of India.

The NIF was initialized with the disinvestment proceeds of two CPSEs namely PGCIL and REC, amounting to Rs 1814.45 crore.

Salient features of NIF:

1. The proceeds from disinvestment of CPSEs will be channelised into the National Investment Fund which is to be maintained outside the Consolidated Fund of India  
2. The corpus of the National Investment Fund will be of a permanent nature  
3. The Fund will be professionally managed to provide sustainable returns to the Govt., without depleting the corpus. Selected Public Sector Mutual Funds will be entrusted with the management of the corpus of the Fund  
4. 75% of the annual income of the Fund will be used to finance selected social sector schemes, which promote education, health and employment. The residual 25% of the annual income of the Fund will be used to meet the capital investment requirements of profitable and revivable CPSEs that yield adequate returns, in order to enlarge their capital base to finance expansion/ diversification  

The NIF corpus was thus managed by three Public Sector Fund Managers. The income from the NIF corpus investments was utilized on select social sector schemes, namely the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Accelerated Irrigation Benefits Programme (AIBP), Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY), Accelerated Power Development and Reform Programme, Indira Awas Yojana and National Rural Employment Guarantee Scheme (NREGS).
   
Restructuring of NIF

On 5th November 2009, CCEA approved a change in the policy on utilization of disinvestment proceeds. In view of the difficult situation caused by the global slowdown of 2008-09 and a severe drought in 2009-10, a one-time exemption was accorded to disinvestment proceeds being deposited into NIF for investment; this exemption was to be operational for period April 2009-March 2012. All disinvestment proceeds obtained during the three year period were to be used for select Social Sector Schemes allocated for by Planning Commission/ Department of Expenditure.

The three year exemption, mentioned above was extended by CCEA on 1st March 2012 by another year, i.e. from April 2012 – March 2013, in view of the persistent difficult condition of the economy. The utilization of disinvestment proceeds were thus continued for funding of Social Sector Schemes till 31st March, 2013.

The Govt. on 17th January, 2013 approved restructuring of the National Investment Fund (NIF) and decided that the disinvestment proceeds with effect from the fiscal year 2013-14 will be credited to the existing ‘Public Account’ under the head NIF and they would remain there until withdrawn/invested for the approved purpose. It was decided that the NIF would be utilized for the following purposes:

1. Subscribing to the shares being issued by the CPSE including PSBs and Public Sector Insurance Companies, on rights basis so as to ensure 51% ownership of the Govt. in those CPSEs/PSBs/Insurance Companies is not diluted.  
2. Preferential allotment of shares of the CPSE to promoters as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 so that Govt. shareholding does not go down below 51% in all cases where the CPSE is going to raise fresh equity to meet its Capex programme.  
3. Recapitalization of public sector banks and public sector insurance companies.  
4. Investment by Govt. in RRBs/IIFCL/NABARD/Exim Bank.  
5. Equity infusion in various Metro projects.  
6. Investment in Bhartiya Nabhikiya Vidyut Nigam Limited and Uranium Corporation of India Ltd.    
7. Investment in Indian Railways towards capital expenditure.