# Public Financial Institutions (Section 2(72))

## Definition

Under Section 2(72), the following institutions are regarded as Public Financial Institutions (PFIs):

#	Institution
(i)	Life Insurance Corporation of India (LIC) – established under the LIC Act, 1956
(ii)	Infrastructure Development Finance Company Limited (IDFC)
(iii)	Specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002
(iv)	Institutions notified by the CG under Section 4A(2) of the Companies Act, 1956 (repealed under Section 465 of this Act)
(v)	Such other institution as may be notified by the Central Government in consultation with the Reserve Bank of India

## Conditions for Notification of New PFI

The CG can notify a new institution as PFI (in consultation with RBI) only if one of the following is satisfied:

### Condition (A) – Establishment

It has been established or constituted by or under any Central or State Act (other than the Companies Act or previous company law).

### Condition (B) – Government Holding

Not less than 51% of the paid-up share capital is held or controlled by:

The Central Government, OR
Any State Government(s), OR
Partly by the Central Government and partly by one or more State Governments

## Key Takeaways

PFIs enjoy a special status under the Companies Act.
The notification process safeguards by requiring RBI consultation.
Either statutory establishment OR significant government holding (≥51%) is the gateway condition.

Worked example

### Example 1

Example 1: NABARD was established under the NABARD Act, 1981 (a Central Act). Hence, the Central Government may notify it as a PFI in consultation with RBI under condition (A).

### Example 2

Example 2: A company has 60% paid-up share capital held by the Central Government and 5% by the Government of Maharashtra (total 65%). It satisfies condition (B) (≥51% government holding) and may be notified as a PFI.

### Example 3

Example 3: A private bank with 100% private holding cannot be notified as PFI as it satisfies neither condition (A) nor (B).

### Example 4

Example 4: LIC is automatically a PFI under Section 2(72)(i) — no separate notification is required.

⚠️ Common exam mistakes

Forgetting that 51% threshold can be met partly by Central + partly by State Government combined.
Confusing 'established under Central or State Act' — the Act must be other than the Companies Act or previous company law.
Thinking RBI consultation is optional — it is mandatory before CG notifies a new PFI.
Missing that the four PFIs (LIC, IDFC, UTI-specified company, and those notified under old Section 4A(2)) are PFIs without further conditions.

Bare-Act text Section 2(72) · The Companies Act, 2013 · click to expand

Section 2(72) – 'Public Financial Institution' means – (i) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956; (ii) the Infrastructure Development Finance Company Limited; (iii) specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002; (iv) institutions notified by the Central Government under section 4A(2) of the Companies Act, 1956 so repealed under section 465 of this Act; (v) such other institution as may be notified by the Central Government in consultation with the Reserve Bank of India: Provided that no institution shall be so notified unless – (A) it has been established or constituted by or under any Central or State Act other than this Act or the previous company law; or (B) not less than fifty-one per cent of the paid-up share capital is held or controlled by the Central Government or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Public Financial Institutions (PFI)

Worked example

⚠️ Common exam mistakes