Government electricity finance institutions cut lending rates
State-owned non-bank financial corporations Power Finance Corporation (PFC) and REC will cut lending rates by up to 2 percentage points from April 1, 2021.
According to PTI, PFC said: “PFC and REC, as group companies, have aligned their operations to achieve synergies. As part of this effort, PFC and REC have now jointly decided to reduce lending rates by up to two percentage points. “
The new lending rates will come into effect on April 1, 2021. PFC and REC are the main financiers in the Indian power sector, with a significant market share.
The initiative was undertaken to offer competitive rates, in line with the rates offered by peers in the market, the PFC statement said.
This move will also help PFC and REC continue to grow their business in the future and maintain reasonable spreads.
Reducing lending rates will help both PFC and REC to offer lower rates to electric utilities, thereby lowering their borrowing costs, thereby reducing their interest payments.
Last year Union Power Minister RK Singh had approved the proposal to accept Letters of Commitment (LoU) from the Indian Renewable Energy Development Agency (IREDA), PFC and REC, to be used as bank guarantees in renewable tenders.
In August 2020, the Ministry of Energy had ad that it had received government approval for a one-off easing of loans to distribution companies (DISCOM). Previously, loans were capped at 25% of the previous year’s working capital of DISCOM’s income under Ujwal DISCOM Assurance Yojana (UDAY). This easing was aimed at providing liquidity to the electricity sector and securing payments from state governments to DISCOMs.
Rahul is a journalist at Mercom India. Prior to entering the world of renewable energy, Rahul was the head of the Gujarat office for The Quint. He also worked for DNA Ahmedabad and Ahmedabad Mirror. With a background in banking and finance, Rahul also worked for JP Morgan Chase and State Bank of India. More articles by Rahul Nair.