# Public Financial Institutions (PFIs) - Section 2(72)

A Public Financial Institution (PFI) is a specially recognised financial institution under the Companies Act, 2013. PFIs play a strategic role in long-term financing of industry and infrastructure.

## Statutorily Recognised PFIs

The following institutions are deemed PFIs under Section 2(72):

#	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 (i.e., the UTI specified company)
(iv)	Institutions notified by the Central Government under Section 4A(2) of the Companies Act, 1956 (as repealed under Section 465 of the 2013 Act)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 PFIs (Proviso)

No institution can be notified as a PFI by the CG unless EITHER of the following is satisfied:

### Condition (A) - Statutory Origin

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 Shareholding

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

The Central Government, OR
Any State Government(s), OR
Partly by Central + Partly by State Government(s).

## Memory Hook - The 'LIIUN' List

L — LIC
I — IDFC
I — Institution notified under old 1956 Act
U — UTI specified company
N — Notified by CG (with RBI consultation)

## Why PFIs Matter

PFIs receive certain regulatory privileges and obligations — for example, in matters of deposits, prospectus issuance, and project financing. They are key institutional channels for industrial growth.

Worked example

### Example 1

Example 1 - Automatic PFI: LIC is a PFI under Section 2(72) by direct statutory listing — no separate notification needed.

### Example 2

Example 2 - New Notification: ABC Development Bank is set up under a Special State Act of Karnataka. The CG, in consultation with RBI, can notify it as a PFI because Condition (A) is satisfied (established under a State Act).

### Example 3

Example 3 - 51% Test: XYZ Finance Ltd. is a private company. The CG and various State Governments together hold 55% of its paid-up share capital. It can be notified as a PFI because Condition (B) is satisfied (combined CG+SG holding ≥ 51%).

### Example 4

Example 4 - Cannot Be Notified: A purely private finance company with no statutory backing and only 30% government holding does NOT satisfy either Condition (A) or (B) — it cannot be notified as a PFI.

⚠️ Common exam mistakes

Forgetting that RBI consultation is mandatory before the CG can notify a NEW PFI under clause (v).
Reading the 51% threshold as exclusive — it can be CG alone, SG alone, OR a combination of CG+SG.
Missing that the two conditions (A and B) are alternatives — only ONE needs to be satisfied, not both.
Excluding institutions notified under the old 1956 Act — those continue to be PFIs even after repeal.

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

'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 sub-section (2) of section 4A 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.

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