The National Renewal Fund (NRF) was set up by the Government of India in February 1992, in the wake of the economic reforms and liberalisation launched in 1991.

As the economy opened up, loss-making public sector units were restructured, downsized or modernised and inefficient industrial capacity was rationalised, which left many workers facing retrenchment and job losses.

The NRF's main purpose was to provide financial assistance to meet the cost of retraining and redeployment of such affected labour, and to fund compensation paid to workers under voluntary retirement schemes (VRS).

In effect it operated as a social safety net, cushioning the workforce against the disruptive impact of structural adjustment and easing the transition to a more competitive, open economy.

It was funded from the budget and from external assistance, and channelled support through an Employment Generation Fund and an Insurance Fund component aimed at redeployment.

It was not created to attract foreign direct investment, to facilitate the government's external borrowings, or to compensate victims of natural disasters, so those options are incorrect.

Hence, its main purpose was to provide assistance to cover the cost of retraining and redeployment of labour.