Government had constituted the National Investment Fund (NIF) in November, 2005 into which the proceeds from disinvestment of Central Public Sector Enterprises were to be channelized. The corpus of NIF was to be of a permanent nature and NIF was to be professionally managed to provide sustainable returns to the Government, without depleting the corpus.Selected Public Sector Mutual Funds, namely UTI Asset Management Company Ltd., SBI Funds Management Private Ltd. and LIC Mutual Fund Asset Management Company Ltd. were entrusted with the management of the NIF corpus. As per this Scheme, 75% of the annual income of the NIF was to be used for financing selected social sector schemes which promote education, health and employment. The residual 25% of the annual income of NIF was to be used to meet the capital investment requirements of profitable and revivable PSUs.

In view of the difficult economic situation caused by the global slowdown of 2008-09 and a severe drought in 2009-10, Government approved a change in the policy for utilization of disinvestment proceeds (5th of November 2009) by granting a one-time exemption to utilize the disinvestment proceeds directly for selected Social Sector Schemes allocated by Department of Expenditure/ Planning Commission. This exemption was to be operational for the period April 2009-March 2012. In view of the persistent difficult condition of the economy, the exemption from channelizing the disinvestment proceeds in the NIF was further extended by another year i.e. from April 2012 to March 2013

In order to align the NIF with the disinvestment Policy, Government decided (17th January 2013) that the disinvestment proceeds, with effect from the fiscal year 2013-14, will be credited to the existing NIF which is a 'Public Account' under the Government Accounts and the funds would remain there until withdrawn/invested for the approved purposes. It was also simultaneously decided that the NIF would be utilized for the following purposes:

1. Subscribing to the shares being issued by the CPSE on rights basis so as to ensure that 51% ownership of the Government in CPSEs 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 Government shareholding does not go down below 51% in all cases where the CPSEs desire to raise fresh equity to meet their Capex programme.
3. Recapitalization of public sector banks and public sector insurance companies so as to strengthen them by further capital infusion towards achieving the Basel III norms.

The Government further approved inclusion of the following purposes also, to be financed from the NIF (21st February, 2013).

1. Investment by Government in RRBs/IIFCL/NABARD/Exim Bank.
2. Equity infusion in various Metro projects.
3. Investment in Bhartiya Nabhikiya Vidyut Nigam Limited and Uranium Corporation of India Ltd.
4. Investment in Indian Railways towards capital expenditure.