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With the country adopting a tighter monetary policy, state-run Rural Electrification Corporation on Wednesday said it plans to increase its lending rates by 50 basis points within two weeks.
“Since the cost of borrowing is going up, we will also think about raising our lending rates in a fortnight,” REC’s Director of Finance Mr H D Khunteta said after releasing the company’s third quarter results.
“We plan to increase the interest rate by 50 basis points after doing consultations with state-run Power Finance Corporation. If we do it, PFC will also increase the lending rates,” he said.
REC’s lending rates ranges from 10.75 per cent to 12.50 per cent for different categories of borrowers.
“Interest rate has gone up by 150 basis points in the past. But our cost of borrowing has not increased because of External Commercial Borrowings. At present, our cost of borrowing is 7.85 per cent which may go up to 8.1 per cent. Thus, we are planning to increase our lending rates by 50 basis points to keep intact our yield on loans,” Mr Khunteta said.
In the 2010 December quarter, the company’s yield-on-loan was 11.24 per cent compared to 10.96 per cent in the same period a year ago.
In the April-December quarter, the yield-on-loan stood at 11.20 per cent compared to 10.75 per cent in the corresponding nine months previous fiscal.
The cost of borrowing in the December quarter of this fiscal was 7.80 per cent, up from 7.7 per cent in the year-ago period.
During the first nine months of the current fiscal, the cost of borrowing was 7.85 per cent as against 7.57 per cent in the same period a year ago.
Mr Khunteta said that REC would register 15 to 20 per cent growth in loan disbursement during this fiscal.
Q3 net up 40 per cent
REC today posted a 40.08 per cent growth in net profit at Rs 664.09 crore for the quarter ended December 31, 2010.
It had a net profit of Rs 474.07 crore in the same period a year ago.
REC’s loan book has increased to Rs 76,000 crore till December this fiscal as compared to Rs 66,000 crore in the year-ago period.
“Since our loan book has increased, so interest income has also gone up, which led to better net profit,” Mr Khunteta said.
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